Title: Tariffs and Quotas: Effects on Imported Goods and Domestic Prices - Economics Class [2021 Video] | Study.com
Headings: Tariffs and Quotas: Effects on Imported Goods and Domestic Prices
Tariffs and Quotas: Effects on Imported Goods and Domestic Prices
Lesson Transcript
Basics of Tariffs and Quotas
Tariff Effects
Quota Effects
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Tariffs and Quotas: Effects on Imported Goods and Domestic Prices
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Tariff Effects
The additional tax, or tariff, on imported goods can discourage foreign countries or businesses from trying to sell products in a foreign country. The additional taxes make the foreign import either too expensive or not nearly as competitive as it would be if the tariff didn't exist. This can lead to fewer choices of goods and a lower quality for consumers. The amount of chocolate, fruits and vegetables, and automotive parts you have to choose from are all subject to the effects of tariffs. Domestic producers benefit by ultimately facing reduced competition in their home market, which leads to lower supply levels and higher prices for consumers. As you can see from the graph below, S0 and D0 represent the original supply and demand curves, which intersect at ( P0, Q0 ). St shows what the supply curve is with the introduction of the tariff. The market then settles at ( Pt, Qt ). Less of the good is produced, and consumers pay higher prices. Graph showing tariff effect

When a consumer does purchase a higher-priced imported good with a tariff imposed on it, the consumer now has less money to spend on other things.