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Imports and protectionism: Explain the main economic determinants of a countries demand for imports –
15 marks
There are many factors of demand for imports
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The relative price of imports in relation to the price of domestically produced goods will affect demand for
imports
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The price difference imported goods
maybe due to the different cost of production in different countries in comparison to those produced in
the domestic country
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This may due to the comparative advantage of the
domestic production
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Due to the comparative advantage patterns the UK economy has
adjusted its production and prices relative to this
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The exchange rate also will have
an effect on the relative price of imports, if the pound is strong then this will mean imports are cheaper
and this may mean they fall below the price of domestically produced goods and services thus increasing
the demand for imports as they become more price competitive
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In the UK was have a high
Marginal propensity to import, therefore when incomes are rising in economic growth then the demand
for imports will also increase, and probably more than the demand to domestically produced goods
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Consumer preference will affect the demand for imports
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Consumers may perceive domestically produced goods to be of a higher standard and this will
therefore decrease the demand for imports
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Additionally environmentally conscious consumers may prefer to buy locally produced products if the
carbon-footprint of them is lower than imported goods which may have been transported a long way
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Quotas
reduce the supply of imported goods/ services pushing up price and decreasing demand for imports and
non-tariff barriers may also decrease the availability of imported goods and services thus decreasing
demand
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