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Drag and Drop Activity

Using figure 2 and the terms provide, complete the following activity.

In figure 2 the world price for hockey sticks is OP₁. The government now imposes a tariff equal to P₁P₂ causing the price of hockey sticks to rise to OP₂
At the higher price(OP₂) domestic producers increase the amount they supply to the market from OQ₁ to OQ₂. Increasing production also stimulates domestic employment. This is referred to as the ____________ as resources are moved from more efficient areas of the economy into the industries protected by tariffs.
The ____________ is the reduction in consumer demand from OQ₄ to OQ₃ as prices increase from OP₁ to OP₂

Tariffs can cause inflationary pressure in the economy as consumers receive fewer goods and pay higher prices. Secondly, the protected goods may be used as inputs for another industries increasing their production costs.
The impact of the protection and consumption effects creates the ____________ causing imports to contract from Q₁Q₄ to Q₂Q₃. Remember the importers still only receive a price of OP₁ and ____________ earnings for exporting countries have decreased from Q₁EFQ to Q₂CDQ₄. This could create problems for our exporting industries as these countries experience reduced revenue that was used to buy imports.
In response to the tariff on imports other countries may impose tariffs on goods that are exported to them. A ____________ could be experienced resulting in job losses in exporting industries.
The amount of revenue raised by the government is equal to the area ABCD this is referred to as the ____________ or redistribution effect. The payment of the tariff by consumers on the imported goods redistributes income from the households to the government. There has also been a ____________ from the importers to the domestic producers as they now receive a greater market share.

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