In this article we will discuss about the theory of optimum tariff. It is, of course, true that tariff, and in certain situations may fail to improve the terms of trade of a given country. There is, however, a widespread belief that tariffs can improve the terms of trade. This leads to a vital question, viz., to what extent a [...]
When a small country imposes tariff on import of the product that competes with the product of the small domestic industry, the tariff can neither affect the international prices (as the country is small) nor can it affect the rest of the economy (as the industry is small). In such conditions, the partial equilibrium analysis that concerns the market for [...]
The tariffs have varying effects upon the real rewards of the factors of production in the short, medium and long term. 1. Short-Term Effect: In order to investigate the effect of tariff upon the real reward of factors in the short period, we proceed with certain assumptions: (i) There are the conditions of free trade. (ii) The country is small. [...]