Scribd
Upload
68 views4 pages

Barbados - Chicken Tariffs To Rise To Protect Domestic Producers

The document discusses tariffs and quotas, including their definitions and impacts. It provides an example of quotas being used on chicken imports and analyzes the effects on producers, consumers, and societal surplus through a graph. While quotas initially support domestic producers, they can reduce consumer surplus and total welfare in the short term by increasing prices.

Uploaded by

Hood Nibba
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
68 views4 pages

Barbados - Chicken Tariffs To Rise To Protect Domestic Producers

The document discusses tariffs and quotas, including their definitions and impacts. It provides an example of quotas being used on chicken imports and analyzes the effects on producers, consumers, and societal surplus through a graph. While quotas initially support domestic producers, they can reduce consumer surplus and total welfare in the short term by increasing prices.

Uploaded by

Hood Nibba
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 4

A.

i)
A tariff is a tax imposed by the government of a country on imports or exports of goods.

ii) a limited quantity of a particular product which under official controls can be produced,
exported, or imported.

B.
i)
Growth: -(2.48-0.10)/2.48*100= -96%
Unemployment: + 3.9%
ii) Structural unemployment

C.
Due to unfair competition from foreign producers. It is stated that many chickens from the EU or
US are sold for 1 or 2 dollars, which barely covers the cost of shipping. Such a practice is called
dumping and is aimed at destroying the local industry to obtain the monopol.

D.
E.

As the AS shifts leftwards, the real GDP will fall as well, and thus unemployment will increase.

F.
G.

The main goal of the quotas is to support domestic producers and avoid the flooding of the
market with cheap products from outside of the country, however it is not really beneficial for
the society, unless the foreign powers conduct dumping.

Graph.1

However, as the graph.1 shows the situation is not that clear. Without quotas, the consumers
would maximise their surplus by buying imported products after the domestic supply curve
crosses the world price(QS1,PW), as the price of domestic chickens will be higher than that
of imported goods. The rest of the goods from Q1 to QC1 would be imported at a world
price.

After introduction of the quotas the total quantity demanded for both domestic and imported
goods moved to QC2, where QS2 were produced domestically while the rest was imported.
As the demand curve didn’t shift and the quantity supplied at a price affordable for
consumers decreased, the price of chickens on the market increased.

As it can be seen on the Graph.1 the total societal surplus decreased, thus welfare loss can
be observed. Those who are especially worse off are the consumers. However, in the long
term the solution might be good. The price of chicken from the US and Eu suggests that they
conduct dumping, as labour costs are much higher in these areas, yet their chicken is 50%
cheaper. It is possible that the consumers would be better of for some period of time,
however, as the foreign producers would totally take over the market, they could raise the
price of products due to the lack of competition, making consumers' situation unbearable.

You might also like