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Size of the Tariff: The higher the tariff, the more revenue the government can generate. However, high tariffs can also discourage imports, reducing the consumption
Size of the Tariff: The higher the tariff, the more revenue the government can generate. However, high tariffs can also discourage imports, reducing the consumption effect. Value of Imported Goods: The higher the value of the imported goods, the more revenue can be generated from the tariff. However, high-value goods may also be more likely to be substituted with domestic products, affecting the protective effect. Elasticity of Demand: If the demand for the imported goods is inelastic, the consumption effect will be smaller as consumers will continue to buy the goods despite the higher price. If the demand is elastic, consumers will reduce their consumption or switch to domestic goods, increasing the protective effect. Domestic Production Capacity: If the domestic industry has the capacity to meet the demand for the goods, the protective effect will be larger as consumers switch from imported to domestic goods. If not, the consumption effect will be larger as consumers continue to buy the imported goods despite the higher price. Income Distribution: Tariffs can have a redistributive effect by transferring income from consumers, who pay higher prices, to the government and domestic producers. The size
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