Chapter 4: Tariffs
Chapter 4 Introduction
Learning Objectives
After reading this chapter, you should be able to
- Discuss the meaning, importance, and types of import tariffs.
- Describe the economic effects of a tariff in a small importing country.
- Describe the economic effects of a tariff in a large importing country.
- Explain the terms of trade effect and a nationally optimal tariff.
Think About It!
Video: Tariffs
Before reading this chapter, watch these videos outlining the basics of how tariffs affect the economy.
Source: Khan Academy. (2018, December 7). Trade and tariffs | AP Microeconomics | Khan Academy [Video]. YouTube. https://www.youtube.com/watch?v=3pSysspeCxY
Source: Free Econ Help. (2018, June 26). How do tariffs affect the economy? [Video]. YouTube. https://www.youtube.com/watch?v=ohq1LwXybVI
Reflection Questions
Before getting into the discussion, we encourage you to reflect on the following questions:
- How does an import tariff affect the price of the imported good on the domestic market?
- What impact do you think the import tariff will have on domestic producers of the import good?
- What impact do you think the import tariff will have on domestic consumers?
- Does the import tariff benefit the nation that imposes it? If not, why do you think nations impose import tariffs?
Introduction
In this chapter, we will see that an import tariff affects the economic well-being of a nation as well as the economic well-being of different groups within the economy. It can also affect the economic well-being of the world. We will evaluate which groups gain and which groups lose from an import tariff, as well as consider its effect on a small country, a large country, and the world.
