Table 1 shows that imports of low-cost electric bicycles into Norland increased after globalisation reduced transport costs. Domestic bicycle firms have ask...
Question 1 Report
Table 1 shows that imports of low-cost electric bicycles into Norland increased after globalisation reduced transport costs. Domestic bicycle firms have asked the government to protect jobs, although consumers want lower prices.
| Year | Imported electric bicycles (thousand units) | Domestic output (thousand units) |
|---|---|---|
| 2021 | 18 | 42 |
| 2022 | 31 | 35 |
Table 1
(a) Which one of the following policies would directly limit the quantity of imported electric bicycles?
A. A quota on imported electric bicycles
B. A reduction in income taxes
C. A subsidy paid to all domestic consumers
D. An increase in government spending on railways [1]
(b) Calculate the percentage decrease in domestic output from 2021 to 2022. Show your working. [2]
(c) Explain one likely effect of a quota on the price paid by Norland's consumers. [2]
(d) Analyse one possible effect of this protectionist policy on unemployment in Norland. [3]
Answer Details
(a) A quota on imported electric bicycles directly limits the quantity that may be imported. [1]
(b) Domestic output fell from 42 thousand units to 35 thousand units:
\[\text{decrease}=42-35=7\text{ thousand units}\]
\[\text{percentage decrease}=\frac{7}{42}\times100=16.7\%\]
Therefore, the decrease was 16.7%, or 17% when rounded. [2]
(c) A quota restricts the supply or quantity of imported bicycles. [1] With fewer imported bicycles available and less competition, the price paid by Norland's consumers is likely to increase. [1]
(d) The quota may lead consumers or retailers to buy more bicycles from domestic firms. [1] Domestic output may rise, increasing firms' derived demand for workers. [1] This can reduce unemployment in bicycle production and linked firms, although the job gains may be limited if higher prices reduce total demand for bicycles. [1]
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