Protectionism

Question 1

Tariffs - Benefit for UK Businesses (4)

Answer 1

1. Tariffs will make imports more expensive as there is a tax on foreign goods
2. Reduces Foreign goods and increases demand for UK businesses who’s prices are lower
3. Inc Production Scale and therefore employment
4. Inc Average incomes + link to GDP / Income elasticity

Question 2

Tariffs - Increased FDI

Question 3

Tariffs - Benefit on UK Businesses (5)

Answer 3

1. Tariffs can be more expensive for foreign imports therefore reducing them
2. Inc Demand for Domestic Goods
3. Inc Production Scale
4. Inc Employment + Income
5. Link to GDP

Question 4

Tariffs - Benefit (Inc FDI) (4)

Answer 4

1. If a Tariff on an inelastic good
2. Increase in Price without significant fall in demand
3. Increase Tax Revenue and Gov Spending
4. More Attractive and Inc FDI -> Improved Skills & Productivity

Question 5

Tariffs - Drawback (Inflation) (5)

Answer 5

1. New Tariffs will increase cost of imports
2. If good can’t be produced domestically they will have to continue to import
3. Business may increase prices due to increase in costs (cost plus inflation)
4. Less disposable income due to the price increase
5. Demand higher wages or Reduce GDP

Question 6

Tariffs - Drawbacks (Reduced Exports) (4)

Answer 6

1. If government imposes tariffs on certain goods
2. Could lead to other countries imposing their own tariffs
3. More expensive for foreign countries to export
4. Reduced exports and tax revenue + GDP

Question 7

Imports Quota - Benefit (4)

Answer 7

1. Limits Quality of imports
2. Limits availability and causes businesses to source domestically
3. Increased Demand for Domestic businesses leading to more Tax Revenue
4. GDP and Gov Spending

Question 8

Imports Quota - Drawback (Inflation) (4)

Answer 8

1. Limits supply for foreign goods which limits availability
2. Increases cost of goods causing businesses to increase prices (cost plus inflation)
3. Increased spending on necessities and reduce spending on luxury / normal goods
4. Low Consumer spending and GDP

Question 9

Subsidies - Benefit (4)

Answer 9

1. Increases Cash paid to business without being need to repay
2. Reduces Cost of Production which means reducing the selling price to remain price competitive
   OR
3. Inc Spending on R&D to innovate and differentiate
4. Increases competitiveness for goods which increases foreign demand and increased exports
5. Link to Sales Volume + EOS OR fiscal spending

Question 10

Subsidies - Drawback (6)

Answer 10

1. Increased Cash paid to businesses
2. Reduced fiscal spending from government
3. Like spending on education which will reduce potential skills of individuals
4. Reduced Productivity
5. Fixed Costs spread over less units and increased unit costs
6. Lower Operating Profit and less business investment reducing GDP

Question 11

Government Legislation - Benefit (5)

Answer 11

1. Legislation like Consumer Protection
2. Sets a quality standard for foreign imports
3. Leading to more bureaucracy to prove the quality and increased admin expenses for foreign businesses
4. Forcing foreign businesses to increase prices
5. Reduces competitiveness (foreign) and increases demand for domestic goods

Question 12

Government Legislation - Drawback (5)

Answer 12

1. Increased in cost for foreign raw materials
2. Inc Cost of Sales for Domestic Businesses
3. Low Gross Profit meaning pressure to increase prices to maintain profit margins
4. Cost Push Inflation and less disposable income for Luxury / Normal Goods
5. Link to GDP