IB Economics 4.2 Types of Trade Protection Questionbank

(c) Using the data in Table 2, calculate the price elasticity of demand (PED) for Albania’s tour packages when the price increases from EUR 400 to EUR 450.

(d) Using the data in Table 1, calculate the absolute change in the unemployment rate between 2021 and 2022.

(e) Define the term “progressive tax.”

(f) Using an AD/AS diagram, explain how an increase in government spending on infrastructure could affect real GDP in Albania.

(g) Using information from Table 1, calculate the approximate percentage change in Albania's Gini coefficient between 2021 and 2022. Show your working.

(h) Using information from the text, explain how a persistent trade deficit might impact Albania’s economic growth.

(i) Using the text/data provided and your knowledge of economics, recommend a policy which the government of Albania could implement in order to reduce unemployment.

Vietnam is an emerging economy in Southeast Asia that has seen rapid industrialization over the past decade. The nation relies heavily on its manufacturing sector, which contributes significantly to its export earnings. However, certain domestic sectors, such as the heavy metals industry, have struggled to remain competitive against lower-priced imports. In 2023, the Vietnamese government considered various trade protection measures to support local steel producers who claimed that foreign firms were selling products below the cost of production in the domestic market.

Steel is a vital component for the construction and automotive industries in Vietnam. To address the surge in imports, the government implemented a trade barrier to increase the domestic price and reduce the volume of imports. While this measure was welcomed by local mill owners, representatives from the construction sector warned that increased costs for raw materials could lead to project delays and higher housing prices.

Table 1: Macroeconomic Indicators of Vietnam (2020–2023)

Table 2: Employment by Economic Sector (2022)

Table 3: Market for Imported Steel in Vietnam (Annual)

Table 4: Trade Protection Policies in Vietnam (2023)

Figure 1 illustrates the impact of the trade protection policy on the domestic steel market.

(a) Using the data in Table 1, calculate the percentage change in the trade balance for Vietnam between 2022 and 2023.

(b) Using the information in Table 3, calculate the reduction in the volume of imported steel (in millions of tons) that occurred after the implementation of the tariff.

(c) Using the information in Table 3, calculate the total tax revenue (in US$ millions) collected by the Vietnamese government from the steel tariff.

(d) Using the data in Table 3, calculate the change in total consumer expenditure on steel (in US$ millions) when the price rises from $400 to $450.

(a) With the aid of a correctly labelled demand and supply diagram, explain how an import quota can affect a domestic market that was previously open to free trade.

(b) Evaluate the likely impact of an import quota on domestic consumers, domestic producers and overall economic welfare in the country.

Solana is an emerging agricultural economy in Southeast Asia with a population of approximately $35$ million. While the country has successfully industrialized its urban centers, the rural regions remain heavily dependent on rice cultivation, which provides employment for nearly $40\%$ of the labor force. Rice is not only a dietary staple but also a culturally significant commodity. However, Solana's domestic rice farmers face significant pressure from large-scale exporters in neighboring countries, where production costs are lower due to favorable climates and advanced irrigation technologies.

In recent years, the Solanian government has prioritised food security and the protection of rural livelihoods. To achieve this, they have moved away from free trade in the rice sector. In $2023$, following a period of high import volumes that depressed local prices, the Ministry of Agriculture introduced a strict import quota on rice. This policy aimed to stabilize domestic prices and encourage local production, though it sparked debates regarding its impact on urban poverty and international trade relations.

The following tables provide data on Solana’s macroeconomic indicators and the domestic rice market.

Table 1: Selected Economic Data for Solana ($2022$–$2023$)

Table 2: Quarterly Domestic Rice Market Data in Solana

Table 3: Solana Rice Trade Policy Data ($2023$)

Note: Assume Solana is a small open economy and a price-taker in the global rice market.

Use the diagram below for the relevant part.

(a) Using the data in Table 2 and Table 3, calculate the percentage change in the domestic price of rice in Solana resulting from the implementation of the import quota.

(b) Using the data provided, calculate the total value of the quota rents generated by this policy. Show your working.

(d) Calculate the change in total quarterly consumer expenditure on rice in Solana after the quota is implemented. Show your working.

Poland is a country in Central Europe with a population of approximately $38$ million. Its membership in the European Union (EU) has contributed to strong economic ties with other European nations. In recent years, Poland has experienced both robust economic growth and rising inflationary pressures. While unemployment remains low, concerns about income inequality have drawn the government’s attention.

Poland is also one of the largest producers of apples in the EU, exporting a significant portion of its harvest to other European countries, especially Germany. However, rising production costs and shifting demand conditions have affected both domestic producers and international consumers of Polish apples. Discussions surrounding potential government interventions include tax policy changes, labor market incentives, and expanded social welfare programs. The statistics below provide insights into macroeconomic performance, apple market dynamics, taxation, and household consumption behavior in Poland.

Table 1: Selected Macroeconomic Data for Poland

Table 2: Apple Market Data (Exports to Germany)

Table 3: Corporate Taxation in Poland ($2022$)

(d) Using the data in Table 2, calculate the price elasticity of supply (PES) for Polish apples over the same price range.

(c) Using the information in Table 2, calculate the price elasticity of supply (PES) for Solana’s domestic rice when the price increases from $120$ to $150$ per tonne.

(a) Using information from Table 1, calculate the real GDP growth rate for Poland between $2021$ and $2022$.

(b) The Polish government decides to increase its expenditure by $5$ billion PLN. Assuming the Marginal Propensity to Consume (MPC) in Poland remains at $0.8$, calculate the change in real GDP that may result from this increase in government spending.

(c) Using the data in Table 2, calculate the price elasticity of demand (PED) for Polish apples in Germany when the price increases from €$2.00$ to €$2.40$ per kilogram.