Question & Answer: What are the key difference between tariff and quota discussed in the article? How do tariff and quota…..

What are the key difference between tariff and quota discussed in the article? How do tariff and quota influence international trade and marketing?

Expert Answer

Difference between tariff and quota are :

  1. Tariff is a tax set by the government on the goods imported from the foreign country, whereas quota is a limit on the quantity of imported goods.
  2. Tariff generates revenue which ultimately increases GDP of the country whereas quota has no effect on the GDP.
  3. As a result of imposing tax producer’s surplus goes up and consumer’s surplus goes down. Whereas as a result of imposing quota consumer’s surplus goes down.
  4. Tariff generates income for the government whereas quota generates income for the traders.

The tariff on the imported goods can discourage import of the foreign goods as it makes things too expensive. Domestic producers are benefited by tariff as the high price on the imported goods make the consumers more inclined towards domestic products. As those who buy high priced imported goods, they now have less amount of money to spend on other things. It automatically reduces the purchasing capacity of the consumers.

With the effect of quota the supply of foreign goods reduces. As a result of this the overall supply of foreign goods in the domestic market decreases which increases price of the limited price of the goods that are imported. As customers pay more price for the products both domestic and foreign producers get benefited as supply is limited consumers are willing to pay more money which increases profit.

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