Question

How does the imposition of a quota affect the domestic price of the import, the domestic consumption, the domestic production, and the quantity imported?

Answer 1

Quota means the limit fixed by the government for importing goods from foreign country.When there is higher import then domestic industries will suffer huge losses hence as a result it also affect the domestic economy.In that case government curtail the limit for importing goods by imposing higher taxes and by fixing quota's.

When quota is imposed by the government then it will limiting the supply of foreign goods hence demand of domestic goods will be regenerated and their prices is also increases because of higher demand of domestic goods and it will also increases the consumption of domestic goods.Due to this domestic production is also enhanced because of higher demand of these goods.Effect of quantity import is that it will decrease.because of imposing quota limit.

Hence domestic price of import is increases.domestic production is increase while import is reduces.domestic consumption is also increases.Quantity imported is reduces.