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Trade protectionism is implemented by nations when they believe unfair competition is ruining their industries. Some view it as defensive policy more often than not driven by political forces. This may be successful in the short run. However, in the long run, it usually does not achieve its original aims as it can make the country, and its industries quite uncompetitive globally. Protectionism is implemented by the government and its aim is to create barriers to entry or exit when it comes to international trade in order to protect domestic firms. Some methods of protectionism include import tariffs, subsidies, and quotas.
Global economic calamities have resulted in a significant change in policies against free markets and instead that support government intervention. This article analyzes if the increasing levels of protectionism implemented by multiple countries, especially by various European countries, is an effective policy.
Scarcity is the fundamental economic problem that arises from consumers having infinite wants and needs when there is only a finite supply of resources. This imbalance results in the occurrence of a shortage, or as economists refer to, scarcity. It means that we need to choose what goods to produce and how much of it we produce. The allocation of resources is extremely important as maximizing consumer utility is mandatory.
The price mechanism, which is an invisible hand involving the interaction between the supply and demand for a good, determines the allocation of scarce resources. The production possibility frontier describes the maximum possible combinations of outputs that can be produced given that all the resources in the economy are being fully and efficiently employed.
For example, let’s imagine a scenario where we experience an increase in the demand for motor vehicles such as cars and motorbikes. Regardless of the increase in consumer wants for both these goods, resources remain limited. Consequently, the manufacturers will need to make a decision on whether to increase their supply of cars or motorbikes. The producer’s aim is to maximise their profits and thus, they will decide which good to produce more based on the respective profits gained from each product. Should the profit made from selling an increased number of cars be higher than that of motorbikes, the firm will allocate more resources to supply more cars compared to motorbikes and vice versa.
Supply and demand are two essential concepts when considering the price mechanism and the allocation of resources. The quantity demanded is in fact defined as the quantity of a good or service customers are willing and able to buy at a given price and a given time. The quantity supplied is the amount of goods and services firms are willing and able to prove at a given price at a given time. Additionally, the law of demand suggests that as price increases, the quantity demanded of that good decreases.
Similarly, the law of supply tells us the higher the price of a good, the greater the quantity supplied. Supply and demand influences prices in many ways. For example, the free market equilibrium occurs at the intersection of the supply and demand curve. When supply exceeds demand, we say that this is a surplus. Conversely, when demand exceeds supply, it is known as a shortage. The way in which to achieve an equilibrium price and quantity in these situations is by shifting either demand or supply. A shift in demand or supply is caused by various factors, except price.
For example, if the price of a substitute good rises, the demand of the original good is likely to increase as it’s the cheaper alternative. When looking at supply, one factor that could shift it is an improvement in the production technology. This will cause higher levels of output and thus an increase in supply. These shifts will help regain an equilibrium.
Cost-benefit analysis refers to the idea of weighing the advantages and disadvantages of a decision. Economists describe the costs and benefits that don’t seem glaringly obvious as ‘hidden’. Let’s consider a situation where you decide with your roommate that one of you will cook and the other will clean the kitchen. One detail that may have slipped your minds is the two of you enjoy different meals and one those could require a greater number of pots and pans and thus will cost more to clean. The hidden cost here is the additional effort given in order to clean more utensils.
Economists understand that it can be difficult to place a monetary value on all benefits or costs. The financial advantages and disadvantages are more often than not only a small proportion of the factors taken into account when making a decision.
Economists tend to identify both factors that can’t be measured with money as well as factors that are easily analysed in terms of monetary value. It is sometimes an economist’s job to look for unique ways to quantify or make an approximation of the monetary value of factors than can in fact influence the decision-making process. This is to better understand the costs and benefits of that particular decision. In general, the individual who devises the idea is likely to exaggerate the pros and downplay the cons. An economist’s aim is to recognize the covert costs and ensure that no one faces any unjust consequences of a decision.
Incentives are essential when choosing economic behaviour. Incentives influence people’s daily lives. One example is when parents generally offer rewards to encourage their children to behave well and punishments to discourage bad behaviour. Incentives can include cultural norms, or financial rewards and punishments. An example of a cultural reward is that individuals could receive social commendations when they assist the deprived. Similarly, they can be punished if they commit crimes such as theft.
Financial incentives involve ways in which people can gain money as a benefit or face fines when they behave badly. Although incentives and disincentives don’t guarantee changes in individuals’ behaviour, they are likely to induce some behavioural changes as a result of the rewards and punishments on offer.
The most common economic incentive in our everyday lives is prices. For example, increases in the price of a good acts as an incentive for consumers to decrease their demand and maybe switch to cheaper alternatives. Price changes are also an incentive for suppliers. If producers see that the prices of their goods are increasing, they are likely to reduce their supply levels in order to ensure they maintain profits and don’t go into a loss-making environment. Although we all do it subconsciously, we make multiple decisions on a daily basis that are a response to the changes in incentives.
While solving economics assignments and homework, students also have to understand statistical techniques and possess a basic foundation of important economic theories. But sometimes this could be a challenge and many students are unable to solve the problems assigned to them and therefore require external help. Our professional services have assisted many students with their college and university assignments. Students who have presented our solutions have consistently scored high. Our economics experts derive accurate solutions and explain them in a manner such that our customers can easily solve it on their own in the future, if necessary. The final solution is delivered in a single MS Word document, with all the required artefacts.
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