Question

effect of import quatas un
der partial equalibrium analysis
​

Answer 1

Answer:

The import quotas can have various effects such as price effect, protective or production effect, consumption effect, revenue effect, redistributive effect, terms of trade effect and balance of payments effect. Some of them can be studied under the partial equilibrium analysis while some others under general equilibrium system. However, these effects have been almost exclusively analysed under the partial equilibrium conditions.

The effects of import quotas can be discussed with the help of Fig. 16.1. In this figure, S0 is the foreign supply curve under free trade and it is perfectly elastic. S1 is the domestic supply curve which slopes positively. D is the demand curve for the given commodity and it slopes negatively. The quantity demanded and supplied of the given commodity is measured along the horizontal scale and price is measured along vertical scale.