Tax on imports is one type of trade barrier. The government could also place a limit on the number of goods that can be imported.

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Chapter 4

NCERT

Class 10

Economics

Solutions

2. Tax on imports is one type of trade barrier. The government could also place a limit on the number of goods that can be imported.

Question:

Tax on imports is one type of trade barrier. The government could also place a limit on the number of goods that can be imported. This is known as quotas. Can you explain, using the example of Chinese toys, how quotas can be used as trade barriers? Do you think this should be used? Discuss.

Answer:

If the Indian government sets a cap on the number of toys imported from China, the supply of Chinese toys in the Indian market will reduce. Due to the lack of Chinese toys in the market, Indian buyers will also have less option to buy Chinese made toys at lower prices. Gradually the demand for Indian toys will increase and Indian toy manufacturers will get profit. Simultaneously, the unemployed laborers of the country will also get employment. In this way the quota system can be used as a trade barrier. In my opinion it should be used in a limited way in India. This will provide protection to some industries and will also help in ending unemployment.

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