Import Quota (Detailed Analysis)

• Impact of a quota on a market

  1. Increase in price from PW to PW + Q

  2. Contraction in domestic demand from Q2 to Q4

  3. Increase in domestic supply from q1 to q1 + Q3 + Q4

  4. Reduction in imports from q1 + Q2 to q1 + Q3
• Domestic producer revenue


  Initially a<|>Now a + c + e + h + i
• Foreign producer revenue


  Initially b + c + d<|>Now b + f + g
• It's hard to know if foreign producer revenue has increased or decreased without actual figures
• Deadweight losses


  I - loss of world efficiency<|>J - loss of consumer surplus
• Understanding the diagram, impact on prices and quantities, effect on revenue, and deadweight losses is sufficient for a good essay on the impact of a quota