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Free trade and protectionism
Free trade and protectionism
In order to understand the implications of protectionism on the welfare of an economy you need first to understand the concepts of consumer and producer surplus. Please revise this topic by reviewing the presentation on this page
protectionism 2017.pptNote that when you are looking at the implications of protectionism on welfare it is usually done in the context of tariffs. Here is a nice video that explains the main points
And... non-tariff barriers.
The effects of quotas is a little more complex, but for those who are keen here is the analysis.
Quotas.pdfHL Quantitative work:
Again HL students should be able to not only graphically show the effects of tariffs and quotas, but also to mathematically measure these effects. Attempt this example
With free trade there are 1000 units of imports. The world price is 15$. Domestic firms supply 500 units.
The Government imposes a tariff on imports of $5 (which increases the price to $20). This reduces imports to 500 units and domestic supply increases to 700.
Calculate the Government revenue from the tariff
Calculate the loss of consumer surplus
Calculate the gain in domestic producers surplus
Calculate the net welfare loss
Protectionism P3 Questions.pdf
Tariff Q2.pdf3. (a) Explain the reasons why countries trade with each other. [10 marks]
(b) Given the benefits of trade, evaluate the economic arguments in favour of protectionism. [15 marks]
This Q was in SL P1 November 2006
3. (a) Explain the reasons why countries trade with each other.[10 marks]
Candidates may include any of the following:
• differences in factor endowments
• variety and quality of goods
• gains from specialization
• political considerations
• learning about new production techniques and technology
HL candidates need to mention “comparative advantage” for full marks.SL do not
(b) Given the benefits of trade, evaluate the economic arguments in favour of protectionism. [ 15 marks]
Candidates may include any of the following:
• infant industry argument
• efforts of a developing country to diversify
• protection of employment
• source of government revenue
• strategic arguments
• means to overcome a balance of payments disequilibrium
• anti-dumping
• maintenance of health, safety and environmental standards
Effective evaluation may be to:
• consider short run versus long run consequences
• examine the impact on different stakeholders
• discuss advantages and disadvantages
• prioritize the arguments
P2 Question
Protectionism_SL_2020.pdfFun crossword puzzle on free trade, protectionism and trading blocks
Fun crossword puzzle on free trade, protectionism and trading blocks
IB_Economics_Teacher_Resource_3ed_Ch14andCh15_crossword.pdfPage updated
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