Tariff and Non-Tariff Barriers Tariff and non-tariff effect global financing operations by having an impact on whether countries will build and invest in companies in the home country. If an organization wants to build a company that imports raw material that has a tariff on it, it would make the product considerably more expensive to produce and export. Tariffs do benefit the government by increasing the revenue and also benefit home-based businesses by decreasing foreign competition. The tariff also helps protect jobs in the industry that has eliminated the foreign competition but a negative impact is felt because it causes the consumer to pay more for a product that is imported (Hill, 2004). If a country it prone to levy tariffs on items that an organization may need, it would increase the risk of doing business while located in that company.
A consequence of this is that the tax increase inhibition of the production produces even affecting business’ competitions (Williamson. 2008). In economics and related fields, a transaction cost is a cost incurred in building an economic exchange. When the unhealthy food and drink taxation rise, producers should improve more cost than before. As a result, they do not have willing to produce the same quantity and quality as usual.
Due to surge in demand, people cannot get the same product at the original price during shortage. Without an increase in the price, the shortage will become worse as sellers will not have the incentive to avail more products in the market. A Price increase gives sellers an incentive to provide more of a product in the product and price goes down to an economically efficient price. Because price gouging is banned in most jurisdictions, rationing the product is done through bribing and first-come-first-served basis. Price gouging is opposed because in a crisis, supply in the short run is perfectly inelastic as shown below.
Tariff reductions on raw materials add to the discrepancy between nominal and effective tariffs of the industrialized nation. This worsens the competitive position in the manufacturing and processing sectors and poses an entry barrier for the less developed nation discouraging diversification as they can’t compete in that commodity sector (115-116). Industrialized nations operate using a tariff structure referred to as tariff escalation. This is characterized by rising rates that give greater protection to intermediate and finished products than to primary commodities. Raw materials may be imported at a low tariff rate but both the nominal and effective tariff rates increase at every stage of production.
The industries in developed countries cannot compete with the ones in developing countries which have labor that produce at low cost. Government, in order to protect their domestic market, impose some trade barriers to stop imports of products from low costs labor countries. We can say that Protectionism is the opposite to Ricardo theory of comparative advantage because in this theory it is stated that more free trade is better, not less, but protective barriers involved with the specialization of labor in a country cause high living standards. Also, restriction of imports causes decrease of product choices and make the cost of products in the domestic market more expensive
If each nation can produce what it does best and permits trade, over the long run everyone will enjoy lower prices and higher levels of output, income and consumption that could be achieved in isolation. Trade restrictions that are put in place by the government on foreign products lower the standard of living for American consumers. Tariffs, quotas, and other trade barriers are the functional equivalent of a tax. It raises the cost of foreign goods and increases the price that consumers pay. The structure of trade restrictions imposes an unbalanced burden on those least able to pay.
However, although inflation is a useful measure for the government, as they can see how the general price level affects other economic factors, it still is considered to be a problem. The higher the rate of inflation the greater the economic cost is what economists see and the reasons for this follow. Stable prices give the consumer a general idea of what a fair price is for a product and which suppliers charge the least for them. With inflation being high, both... ... middle of paper ... ...vernment are uncertain what the rate of inflation will be in the future. When planning they therefore has to estimate as best they can the expected rate of inflation.
Effects of industrial regulation to the market: The market reacts differently depending on the goal of the regulatory goals and objectives. If the aim was to protect the consumer by preventing the traders from hiking prices, then the traders might reiterate by reducing the level of production and thus creating a shortage. This usually happens if the producers and the traders were not necessarily making huge profits If the regulations were put in place after an agreement between the various players in the market, then it will be accepted. As a result products will be sold in a fair and reasonable price hence increasing their demand. Consequently the producers will produce more to satisfy the huge mar... ... middle of paper ... ...commissions includes: bureau of alcohol and tobacco, and fire arms which regulate abuse and misuse of the substances; equal employment commission which ensures the employment process is not biased; federal highway administration which ensures proper maintenance and good conduct on the highways; federal maritime commission which promotes safety in water travel; and federal election commission which promotes free and fair elections (Wikinvest).
The reason for a ceiling price is to help keep prices down when a certain item is in great demand. According to the basic principles of micro economics, the seller will raise the prices of products in great demand so they ( the seller) can profit the most. After all, the seller’s objective in his business is to make the most profit possible at the expense of the buyer. These government imposed prices help the buyer in the sense that the price will not soar past a certain point so that those with a lower income can still afford the item. When the ceiling price is placed above the EP, there is a chance of a short term surplus that will force the price of the item down, which in turn, will set a new EP for it.
Additionally, he also claimed that the monetary policy shock temporarily lowers output while increasing unemployment and has a negative effect on consumer price inflation. Besides that, Kearns and Manners (2006) find that monetary policy shock will increases the interest rate has a significant appreciating effect on the exchange rate. Thus, an increase in interest rate may have prevented the exchange rate from falling even further.