Answer to Question #192119 in Economics of Enterprise for Naukalemo

Question

Namibia import most of its goods, and to encourage local production it can levy a tariff on imports. Discuss the effects of a tariff on an importing country such as Namibia.

Answer 1

Namibia being a developing country and a country dependent mostly on its imported goods, imposing a tariff would have a directly effect on both the consumers and the producers.

When the government opts to levy tariff on imports the cost of the imports will go up thus the goods will get costlier for the consumer and they will have to pay higher prices for the same.

On the other hand when the prices of the imported goods go up the demand for the same will fall thus this will encourage the domestic industry to come up with a competitive price and compete with the foreign firm in the domestic market. This will definitely lead to growth of the domestic industries.