🎓 NESA HSC Economics • Topic 2: Protection

Interactive Quotas & Tariffs Moving Diagrams

Explore how Import Quotas, Tariff Quotas, and Tariffs affect domestic supply, domestic demand, world vs. domestic prices, government revenue, and deadweight welfare loss.

Diagram 1: Import Quota & Quota Limits Diagram 2: Tariffs & Demand/Supply Shifts HSC 5-Effect Comparison Table
Diagram 1 • Quotas

Import Quota & Tariff-Quota Diagram (Changing Quota Limit)

Watch how changing the Quota Limit (High → Medium → Low → No Imports) shifts effective supply (S + Quota) and drives Domestic Price (PQ) above World Price (PW).

PW World Price (SW) PE Ddom Sdom S + Quota PQ Q1 Q2 Q3 Q4 Quota Imports E (No Imports) Price ($) Quantity 0
Medium Quota
0 (No Imports) Low (50) Med (100) High (150) Free Trade (200)
Domestic Quota Price (PQ)
$40.00 (World PW = $20)
Import Volume (Q4 − Q3)
100 units (-50% vs Free)
Domestic Supply (0 → Q3)
100 units +50 expansion
Domestic Demand (0 → Q4)
200 units -50 contraction
HSC Economic Analysis: Quota Rent / Tariff-Quota Rev: $2,000

Tightening the quota to a Medium Limit (100 units) creates an import shortage at PW, pushing domestic price up to $40. Domestic output expands (Q1 → Q3) and consumption contracts (Q2 → Q4).

Producer Surplus Gain Quota Rent / Tariff-Quota Rev Deadweight Loss
Diagram 2 • Tariffs

Tariff Diagram (Changes in Tariffs & Shifts in Demand / Supply)

Adjust the Tariff Per Unit (T) or shift Domestic Demand (D) and Domestic Supply (S) to see impacts on price (PT), imports (Q3Q4), and Government Revenue (ABCD).

PW SWorld D S PT SW + Tariff T Q1 Q2 Q3 Q4 A B C D Imports after Tariff Price ($) Quantity 0
Medium Tariff ($20)
$0 (Free Trade) $10 $20 $30 $40 (No Imports)
Shift Demand (D): 0
Shift Supply (S): 0
Tariff Price (PT = PW + T)
$40.00 (+$20 tariff)
Govt Revenue (Box ABCD)
$2,000 (100 imp)
Quantity Supplied (Q3)
100 units +50 expansion
Quantity Demanded (Q4)
200 units -50 contraction
HSC Tariff Effects on D & S: Deadweight Loss: $1,000

A $20 tariff raises price to $40, causing an expansion along S (Q1 → Q3 = 100) and contraction along D (Q2 → Q4 = 200). Govt revenue ABCD = $2,000.

Producer Surplus Gain Govt Tariff Revenue (ABCD) Deadweight Loss
HSC Exam Revision

5 Economic Effects of Quotas vs. Tariff Quotas vs. Tariffs

Economic Effect Import Quota (PW → PQ) Tariff Quota Import Tariff (PW → PT)
1. Protection (Supply) Effect Domestic supply expands along S from 0Q1 to 0Q3. Domestic supply expands as above-quota tariff raises domestic price. Domestic supply expands along S from 0Q1 to 0Q3.
2. Consumption (Demand) Effect Domestic demand contracts along D from 0Q2 to 0Q4 due to higher price PQ. Domestic demand contracts as consumers face higher retail prices. Domestic demand contracts along D from 0Q2 to 0Q4 due to higher price PT.
3. Import Volume Effect Guaranteed cap on import volume (fixed at Q3Q4); price adjusts to clear market. Imports up to quota pay standard rate; imports above quota pay higher punitive tariff. Import volume falls indirectly (Q1Q2 → Q3Q4) depending on price elasticity of D & S.
4. Redistribution Effect Consumer surplus is transferred to domestic producers (green trapezium). Consumer surplus is transferred to domestic producers and government. Consumer surplus is transferred to domestic producers (green trapezium).
5. Revenue Effect No government revenue (goes to import licence holders as Quota Rent unless auctioned). Generates government tariff revenue on imports (combining quota cap + revenue). Government collects Tariff Revenue equal to box ABCD (Tariff × Q3Q4).