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hi Sir,
One of advantages of adopting protectionist measures is Reduction in balance of trade deficit.
“Due to retaliation by other countries, the success of such measures by one country would depend on
the demand by other countries for its exports being inelastic with regard to price and its demand for
imports being fairly elastic”
Can you please explain it?
thank youProtectionist measures could involve such things as increasing the tax on imported goods, making them more expense, therefore fewer sales of imported goods.
However, if other countries retaliated by doing the same thing on their imports of goods from our country, then our exports become more expensive and we will sell less (unless the demand is inelastic – i.e. people in the other country still continue to buy (maybe because they need them e.g. oil) even if the price is increased because of taxes.
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