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Tariff barrier, instead of providing incentive for the domestic industries, distorts the market. It encourages the growth of inefficient industries, as they do not have to worry much from foreign competition.
Tariff reduces the volume of import as well as export. Because of tariff barrier, some of the gains from trade are lost. The government and the producer gain in this process, but they gain at the expense of consumers. Government by placing tariff barrier on goods, increases in the price of the goods as a result domestic consumer has to pay more for the product. This reduces the standard of living of the domestic consumers.
Protection is also placed in order to increase the employment in the country by increasing production in the home country. But this improvement is achieved at the expense of employment elsewhere. This practice also sometimes invites retaliation from other nations.
In recent years, because of several drawbacks in the tariff, the use and importance of the tariff is declining.
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