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Economics 4.1.6
Economics- Edexcel 4.1.6
| Term | Definition |
|---|---|
| dumping | when firms sell exports at below costs or below normal prices in the home market |
| predatory pricing | the illegal business practice of setting prices for a product unrealistically low in order to eliminate the competition |
| price discrimination | a selling strategy that charges customers different prices for the same product or service based on what the seller thinks they can get the customer to agree to |
| anti dumping tariffs | allowed under WTO rules when cases of dumping have been established |
| 3 main options when introducing an anti-dumping import duty | ad valorem duty, specific duty, variable duty |
| variable duty | minimum import price |
| MIP | minimum import price |
| lesser-duty rule | rule that duties can’t exceed the level needed to repair the harm done to European industry by the unfair dumping practices |
| types of trade restrictions | import triffs/import quotas/subsidies/rules of origin/ migration controls/managed currencies |
| import quota | a physical limit on the quantity of a good that can be imported into a country |
| import tariff | a tax on imports that may be ad valorem or a specific tax |
| non-tariff barrier | trade barriers such as import quotas, environmentalist regulations, trade embargoes and export subsidies |
| trade embargoes | international trade restrictions adopted in response to objectionable policies backed by a variety of legislative acts and presidential orders |
| rules of origin | rules put in place governing the national sourcing of a product, e.g. a country might set a minimum percentage for locally sourced components |
| subsidy | payments by the government to suppliers that reduce their costs, to increase supply and reduce the market equilibrium price |
| import tariffs cause | a switch of spending towards domestic producers |
| import tariffs generate | tax revenues for the government and may lead to an improvement in a nation’s external trade balance |
| quota | limit on the total quantity of a product can be supplied to a market |
| import quota | restricts the supply of an imported product, causing prices to rise, shadow markets can develop |
| domestic subsidy | any form of government financial help to domestic businesses by lowering costs and becoming more competitive in markets/offering financial incentives to sell products overseas |
| key types of non-tariff barriers | intellectual property laws/technical barriers to trade/preferential state procurement policies/domestic subsidies/financial protectionism/murky or hidden protectionism/managed exchange rates |
| intellectual property laws | includes patents and copyright protection |
| technical barriers to trade | include labelling rules and stringent sanitary standards at customs borders |
| preferential state procurement policies | where government favour local producers when finalizing contracts for state spending |
| domestic subsides | aid for domestic businesses facing financial problems |
| financial protectionism | such as when a government instructs banks to give priority when making loans to domestic businesses |
| murky or hidden protectionism | such as state measures that indirectly discriminate against foreign workers, investors and traders |
| managed exchange rates | government / central bank intervention in currency markets to affect relative prices of imports and exports |
| conventional view of tariffs | lead to a deadweight loss of economic welfare mainly through the effects of higher prices for consumers and the distorting effects of a tariff on market competition, prices and the allocation of scarce resources |
| main drawbacks of protectionism | resource misallocation/dangers of retaliation/potential for more corruption/higher prices for domestic consumers/ increased input costs for home producers/barriers to entry |
| resource misallocation | leads to a loss of economic efficiency |
| dangers of retaliation | risks of a persistent trade war |
| potential for more corruption | tariffs are higher in less democratic countries, revenues can be appropriated |
| higher prices for domestic consumers | a regressive impact on poorer people/communities |
| increased input for home producers | damages competitiveness for businesses that require key imported component parts and raw materials that are subject to an import tariff or stringent quota |
| barriers to entry | protectionism reduces market contestability and increases monopoly power |
Created by:
jessharris
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