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One final reason why economists often treat the national interest argument    skeptically is that almost any product can be touted by lobbyists and politicians as vital to national security. In 1954, the United States became worried that it was importing half of the wool required for military uniforms, so it declared wool and mohair to be “strategic materials” and began to give subsidies to wool and mohair farmers. Although wool was removed from the official list of “strategic” materials in 1960, the subsidies for mohair continued for almost 40 years until they were repealed in 1993, and then were reinstated in 2002. All too often, the national interest argument has become an excuse for handing out the indirect subsidy of protectionism to certain industries or companies. After all, decisions about what constitutes a key strategic material are made by politicians, not nonpartisan analysts.

Key concepts and summary

There are a number of arguments that support restricting imports. These arguments are based around industry and competition, environmental concerns, and issues of safety and security.

The infant industry argument for protectionism is that small domestic industries need to be temporarily nurtured and protected from foreign competition for a time so that they can grow into strong competitors. In some cases, notably in East Asia, this approach has worked. Often, however, the infant industries never grow up. On the other hand, arguments against dumping (which is setting prices below the cost of production to drive competitors out of the market), often simply seem to be a convenient excuse for imposing protectionism.

Low-income countries typically have lower environmental standards than high-income countries because they are more worried about immediate basics such as food, education, and healthcare. However, except for a small number of extreme cases, shutting off trade seems unlikely to be an effective method of pursuing a cleaner environment.

Finally, there are arguments involving safety and security. Under the rules of the World Trade Organization, countries are allowed to set whatever standards for product safety they wish, but the standards must be the same for domestic products as for imported products and there must be a scientific basis for the standard. The national interest argument for protectionism holds that it is unwise to import certain key products because if the nation becomes dependent on key imported supplies, it could be vulnerable to a cutoff. However, it is often wiser to stockpile resources and to use foreign supplies when available, rather than preemptively restricting foreign supplies so as not to become dependent on them.

Problems

You have just been put in charge of trade policy for Malawi. Coffee is a recent crop that is growing well and the Malawian export market is developing. As such, Malawi coffee is an infant industry. Malawi coffee producers come to you and ask for tariff protection from cheap Tanzanian coffee. What sorts of policies will you enact? Explain.

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The country of Pepperland exports steel to the Land of Submarines. Information for the quantity demanded (Qd) and quantity supplied (Qs) in each country, in a world without trade, are given in [link] and [link] .

Pepperland
Price ($) Qd Qs
60 230 180
70 200 200
80 170 220
90 150 240
100 140 250
Land of submarines
Price ($) Qd Qs
60 430 310
70 420 330
80 410 360
90 400 400
100 390 440
  1. What would be the equilibrium price and quantity in each country in a world without trade? How can you tell?
  2. What would be the equilibrium price and quantity in each country if trade is allowed to occur? How can you tell?
  3. Sketch two supply and demand diagrams, one for each country, in the situation before trade.
  4. On those diagrams, show the equilibrium price and the levels of exports and imports in the world after trade.
  5. If the Land of Submarines imposes an anti-dumping import quota of 30, explain in general terms whether it will benefit or injure consumers and producers in each country.
  6. Does your general answer change if the Land of Submarines imposes an import quota of 70?
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References

Kohut, Andrew, Richard Wike, and Juliana Horowitz. “The Pew Global Attitudes Project.” Pew Research Center . Last modified October 4, 2007. http://www.pewglobal.org/files/pdf/258.pdf.

Lutz, Hannah. 2015. “U.S. Auto Exports Hit Record in 2014.” Automotive News. Accessed April 1, 2015. http://www.autonews.com/article/20150206/OEM01/150209875/u.s.-auto-exports-hit-record-in-2014.

Questions & Answers

An economy exprerience inflation when?
Odirile Reply
given a table of weeks worked and numbers of goods produced per week. help to culculate margin.
Odirile
there is a persistent rise in general prices and purchasing power of money decreses
khatoon
The taste of preferences of consumers will drive demand
Marisol Reply
Explanation about law of demand
Marisol Reply
The price of the good or service meaning?
Marisol
What is consumer expectation?
Marisol
Any other explanation?
Marisol
marisol u share your explaination pls
OK
The law of demand states that all other things being equal the higher the price of a commodity the lower the quantity of the same commodity demanded inversely. This implies that anytime there is an increment on a price of certain commodity the demand of the same commodity decline.
Nana
consumer expectations are the households view point regarding the market changes. If people are expecting a positive change in the market their Marginal Propensity to Consume will increase and vive versa.
arshad
Marisol are you okay with my explanation?
Nana
yes. thankyou.
Marisol
welcome
Nana
what are the determinants of demand and explain each?
Marisol Reply
what is the price of the good or services meaning?
Marisol
marzi tumhari
Aryan
lol
Aryan
khud par le
Aryan
Define microeconomics and macroeconomics..
Odirile Reply
In free market economy who market resources?
Odirile
Can you please explain how GDP is calculated?
Odirile
yes GDP meas all product produced in Economy first the country have to calculate all goods produced then we have to see the market value of goods at final stage we have to mutliple final goods to their market price we get GDP
Wani
what is consumer expectation?
Marisol
suppose country are producing 10 goods price of per good is $1 therefore GDP = 10 good × $1 =$ 10
Wani
Thank you for the answers @Wani
Odirile
most welcome odirile
Wani
what is the price of the good or service?
Marisol Reply
suppose price of per good is (ice-cream) is 5 the consumer are ready for buying 2 goods(2 ice creams) if price will increase from 5 to 10 per good then the consumer will demand only one good or one ice-cream because price is increased and his income is limited
Wani
what is income buyer?
Marisol
in law of demand we assume some factors constant some factors are income taste future preference constant
Wani
what is price of related goods or services?
Marisol
suppose your income per month is 10, 000 and your needs satisfied by these 10,000 if price of good will increase you need more than 10,000 to satisfy your needs that is why we says at higher price demand of goods decrease
Wani
What is the taste of preferences of consumers will drive demand?
Marisol
suppose you are eating pizza and u fell its taste good you will buy more pizza this called taste we assume in law of demand that taste of goods remain Same
Wani
related goods are either complementary goods are substitute goods
Wani
what is Consumer expectation?
Marisol
relationship between price and quantity? about the law of demand
Marisol Reply
P⬆️ Qd⬇️
DNA
what is law of demand?
Marisol
If Prince increases, Quantity demand will decrease and vice versa. So relationship b/w price and demand is inverse. There are some exceptions also. Like complementary goods and substitute goods.
DNA
any other answers? thankyou anyways. Twas a big help.
Marisol
the law of demand states that, "conditional on all else being equal, as the price of a good increases, quantity demanded decreases; conversely, as the price of a good decreases, quantity demanded increases".
DNA
law of demand says when price of good increase there demand will decrease and vice versa in short law of demand show negative relationship between price and demand of goods
Wani
All other factors like income, taste, preference, season shall remain constant
DNA
Rohi g Bilkul sahi farmov veh!
DNA
law of demand not apply on Griffen goods and luxurious goods
Wani
sir will u plz explain me why we add Griffen goods in aggregate demand no body explain me this question
Wani
definition of monopoly
Odirile
monopoly is a form of market where there is only one supplier , supplying the product . in other words monopoly means only one industry or enterprise are selling the product
Wani
what is monopolistic
Odirile
what are the determinants of demand and explain each?
Marisol
monopolistic competition is a form of market where there are many sellers selling differentiated product
Wani
bravo
Aryan
answer
Aryan
determinants of demand are 1.income :- if income of a person increase its demand for products will increase 2 . price :- if price of product increase there demand will decrease and vice versa 3. taste :- if buyer feels taste of product good then his demand for that product will increase
Wani
there are 5 determinants of demand?
Marisol
yes another one is if there customer are more in Economy more good will be demand
Wani
and what is the last one? I mean the fifth one?
Marisol
the other one is related goods related goods are either substitute goods are complementary goods if goods are substitute then if price of good will increase then demand for its substitute will increase
Wani
thankyou ❤️
Marisol
What is the concept of rationality in economics
Odirile Reply
Remuneration 10000 Net trade surplus 8000 Provision for depreciation 500 Indirect taxation 700 subsides 1000 Net factor payments 500 using information above calculate: 1GDP at factor cost 2GDP at market Price 3GNP at market price 4National income
Odirile
rationality simply means that you will always go for best choice in the available set of choice.
Rahul
which actions would most likely shift the production possibilities frontier outwards?
Odirile
what is consumer expectation in economics?
Marisol
the factory that cause shift to PPC are labour force, price of inputs. use of technology etc.
Wani
Marisol where from you
Wani
thankyou for the answers.
Marisol
From the Philippines Sir.
Marisol
most welcome marisol
Wani
a. Assume that Good X is a Giffen good, illustrate and explain the income and substitution effects for a decrease in the price of good X.
Thulisa Reply
as price of good X(assume as Griffen good) decrease income of the consumer increase , consumer will demand other goods rather than the Griffen goods thus at lower prices of good X it's demand will decrease.
Wani
what is law of demand
Hugo Reply
what is the law of demand
Hugo
What is the law of demand
Hugo
just considering the relationship between price and quantity, holding other factors constant.
Donation
when the price of a commodity increases, it's demand will decrease. and when the price of a commodity decreases, it's demand will increase, other things remaining the same or constant. That is called Law of Demand.
Azka
other things remained constant there is inverse relationship between price and quantity demand i .e when price of a commodity increased the demand of quantity will decrease and vice- versa.
khatoon
right @KhatoonNafisa
Azka
Other answers about the law of demand and how it relates between the price and quantity?
Marisol
sir define me prison of delima
Ibrahim Reply
it is a paradoxical situation, where two individuals acts for their self interest but don't achieve the optimal point.
Rahul
gays why we add Griffen goods in aggregate demand as we know Griffen goods have positive relationships that means if price increase demand of goods also increase .but in aggregate demand there is a negative relationship between price and aggregate output.
Wani
what is the concept of rationality in economics?
Odirile
explain the determinants of derive demand?
what financial market is all about
Emmanuel Reply
What happens to the ppf curve due to following events a) A relaxation of policies allowing more foreign direct investment into the country b) Increasing the minimum wage level c) A decrease in expenditure on research and development d) An increase in the retirement age
luvi Reply
is truly
Ibrahim
Discuss various from the imperfect competition
ZuBaIr Reply
hi how do get your workers to be more competitive
Margaret
hey where from you all
Wani
kashmir
Ahmad

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Source:  OpenStax, Microeconomics. OpenStax CNX. Aug 03, 2014 Download for free at http://legacy.cnx.org/content/col11627/1.10
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