Using an appropriate diagram, explain who gains and who loses from the introduction of a tariff

1)   Demands of the question (Time)

a.     Draw tariff diagram

b.     Identify stakeholders when a tariff is imposed

c.      List out the pros and cons of each stakeholder

d.     Explain why it is a pro or a con

2)   Definition: cut and paste

a.     Protectionism: When the government imposes a tariff, a quota, or a subsidy in order to protect local industries from foreign industries.

b.     Tariff: a duty (tax) that is placed upon imports to protect domestic industries from foreign competition and to raise revenue for the government

3)   Cut and paste from triple A

a.     “A tariff is a tax on imports, which can either be specific (so much per unit of sale) or ad valorem (a percentage of the price of the product). Tariffs reduce supply and raise the price of imports. This gives domestic equivalents a comparative advantage. As such, tariffs are distorting the market forces and may prevent consumers from gaining the benefit of all the advantages of international specialisation and trade.”

4)   Bullet points of this

a.     “Tariffs reduce supply and raise the price of imports”

b.     “domestic equivalent a comparative advantage”

c.      “prevent consumers from gaining the benefit of all the advantages of international specialization and trade”

5)   Insert relevant PP slides

tariff

6) Diagram

a.     “The tariff has the effect of shifting the world supply curve vertically upwards by the amount of the tariff. The level of imports will fall from QaQd to QbQc. The government will also raise revenue, shown by the blue shaded area. The level of domestic production will increase from 0Qa to 0Qb.”

 

 

 

7) Evaluation Suggestions

- stakeholders

- pros and cons