Answer to Question #307365 in Microeconomics for jane

Question

Suppose the government wants to limit imports of a certain good. Is it preferable to use an import quota or a tariff? Motivate why you recommend one over the other

Answer 1

Import quotas are the best way to manage the products being imported in the country. Tariffs can only act to stop the purchase of these products for a while but over the years, customer can adjust their prices to accommodate the new prices of the products having tariffs, especially if they are addictive like alcohol. Quotas specifies the maximum amount of goods that can be imported, which is better than tariffs. the levies charged on goods are reflected on the prices of the same goods by increasing their prices, which means that for the addictive products, even if the prices are high people will still manage to buy them. However, for quotas even if people are addicted to them, exhaustion of the imported goods will lead to shortage since more cannot be imported, which is different in tariffs since more can be imported in case there is more demand.