Types of Restrictions on Free Trade – Economics Revision – The Tutor Academy

Types of Restrictions on Free Trade – Economics Revision – The Tutor Academy

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Level: AS Levels, A Level, GCSE – Exam Boards: Edexcel, AQA, OCR, WJEC, IB, Eduqas – Economics Revision Notes

Types of Restrictions on Free Trade

 

Quotas

Quotas are limits on the quantity of a product being imported. It restricts the physical amount of product which a country can buy

Tariffs

 

 

Tariffs are taxes imposed on imported goods. The aim of tariffs is to increase the price of a product and discourage a country to import more

Subsidies

[diagram]

Firms are offered subsidies from the government to encourage them to lower their costs and become more competitive.

Subsidies reduce the price a firm pays for each unit and consumer also pay less as the products are subsidised by the government

Non-tariff Barriers

Some other methods to reduce free trade include: the health and safety regulations imposed, labelling of products and environmental regulation

The impact of Protectionist Policies

  • Producers – firms face less competition and can produce lower average costs
  • Consumers – restrictions such as Tariffs and Quotas raise the price of the imported products, hence consumers are left with less choice and variety
  • Government – the government is able to increase their tax revenue generate through import taxes and tariffs
  • Economy – lower output is caused because of less specialisation and a depletion of the country’s comparative advantage

 

Quick Fire Questions – Knowledge Check

1. Identify and explain four types of Restrictions on Free Trade (8 marks)

2. Using a diagram, explain the effect of a tariff and how it acts as a barrier for trade (4 marks)

3. Using a diagram, explain the effect of a subsidy and how it acts as a barrier for trade (4 marks)

4. Explain the impact of Protectionist Policies (8 marks)

 

Next Revision Topics

 

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