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Outline three mechanisms for restricting free trade - Leaving Cert Economics - Question 5 - 2013
Question 5
Outline three mechanisms for restricting free trade. (i) (ii) (iii)
Worked Solution & Example Answer:Outline three mechanisms for restricting free trade - Leaving Cert Economics - Question 5 - 2013
Step 1
(i) Tariff
Answer
A tariff is a tax imposed on imported goods. This mechanism raises the cost of foreign products, making domestic products more competitive. For example, if a government places a tariff of 20% on imported cars, the price of these cars increases in the local market, potentially leading consumers to choose domestic alternatives.
Step 2
(ii) Quota
Answer
A quota is a limit on the quantity of goods that can be imported during a specific period. By restricting the amount of foreign goods, quotas help to protect domestic industries from foreign competition. For instance, a government may set a quota that allows only 10,000 units of a particular product to be imported annually.
Step 3
(iii) Embargo
Answer
An embargo is a total ban on imports from a specific country. This mechanism is often used for political reasons, to pressure a government or comply with international sanctions. For example, if a country imposes an embargo on another country, it prohibits all forms of trade with that nation, significantly affecting its economy.