A tariff is a tax placed on imported goods, which raises their price in the domestic market.

Which four areas can be identified on a tariff diagram once the price has risen?

The gain in domestic producer surplus, the government's tariff revenue, and two deadweight welfare loss triangles, one from inefficient extra domestic production and one from consumption forgone.

How is government revenue from a tariff calculated?

Tariff revenue equals the tariff per unit multiplied by the number of units still imported after the tariff is in place.

A tariff of £4 per unit reduces imports from 900,000 to 600,000 units a year. Calculate the government's tariff revenue.

Tariff revenue is £4 × 600,000 = £2.4 million a year.

Edexcel A-Level Economics B 9EB0

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Globalisation

Protectionism: tariffs, quotas and other trade barriers

3 things to know
Papers 2 and 3

Overview

Protectionism, tariffs and the tariff diagram with its welfare areas, calculating tariff revenue, deadweight loss, import quotas and quota rent, tariffs against quotas for government finances, non-tariff barriers, regulations as hidden barriers, embargoes, domestic production subsidies and their diagram, arguments for protection, and retaliation.

What you need to know

Answer each one before you reveal it.

Your recallNot started

Key term

Describe what happens on a demand and supply diagram for a good when a tariff is imposed on imports.

Key term

Define protectionism.

Key term

What is a tariff?

Questions from this subtopic

Each one with the model answer underneath.

1
Define protectionism.
Model answer
Protectionism is the use of government measures such as tariffs, quotas and regulations to restrict imports and shield domestic producers from foreign competition.
2
What is a tariff?
Model answer
A tariff is a tax placed on imported goods, which raises their price in the domestic market.
3
Describe what happens on a demand and supply diagram for a good when a tariff is imposed on imports.
Model answer
The world supply line shifts upward by the amount of the tariff, so the domestic price rises, domestic quantity supplied increases, total quantity demanded falls, and the gap between them, which is imports, narrows.
4
Which four areas can be identified on a tariff diagram once the price has risen?
Model answer
The gain in domestic producer surplus, the government's tariff revenue, and two deadweight welfare loss triangles, one from inefficient extra domestic production and one from consumption forgone.
5
How is government revenue from a tariff calculated?
Model answer
Tariff revenue equals the tariff per unit multiplied by the number of units still imported after the tariff is in place.
6
A tariff of £4 per unit reduces imports from 900,000 to 600,000 units a year. Calculate the government's tariff revenue.
Model answer
Tariff revenue is £4 × 600,000 = £2.4 million a year.

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