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O-level Economics june 09 question 7 (d)
- Thread starter dasani
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-Define tariffs
-Increases competition for the domestic industries
-Therefore lower demand for domestic goods if the quality of imported goods is higher
-Unemployment increase as domestic production reduces
-Exchange rate depreciates (this might curb imports but only if the PED is elastic)
The argument is only justified if the exchange rate can be maintained with the use of adequate foreign currency reserves, and that the domestic goods are competitive enough to make sure unemployment does not increase. It would be even better if the domestic industry is say primary industry but imports are of manufactured good then it is not justified. But if they are of the same industry then to protect the domestic firms tariffs should not be removed.
-Increases competition for the domestic industries
-Therefore lower demand for domestic goods if the quality of imported goods is higher
-Unemployment increase as domestic production reduces
-Exchange rate depreciates (this might curb imports but only if the PED is elastic)
The argument is only justified if the exchange rate can be maintained with the use of adequate foreign currency reserves, and that the domestic goods are competitive enough to make sure unemployment does not increase. It would be even better if the domestic industry is say primary industry but imports are of manufactured good then it is not justified. But if they are of the same industry then to protect the domestic firms tariffs should not be removed.
- Messages
- 726
- Reaction score
- 52
- Points
- 0
No, as it is an analyse question so a bit of time will be required to successfully bring in a developed explanation. What you can do is to cut down the amount of detail for each point.