Healey pledges cheaper marmalade and gherkins in pre-Budget package of 'everyday fixes'
Real-world example for IB, A-Level, AP and IGCSE Economics essays: Tariffs and protectionism, Taxes, subsidies and price controls, Supply, demand and prices
What happened
The chancellor will remove tariffs on some everyday food items, including marmalade and gherkins, as part of pre-Budget plans aimed at giving households more breathing space.
The economics
Scrapping an import tariff lowers the cost of imported goods, shifting supply to the right so that, with demand unchanged, retail prices fall and household cost-of-living pressure eases. It is also the reverse of protectionism: cutting a trade barrier benefits consumers.
Evaluation
A tariff is only one component of the retail price, so transport, processing and retailer margins also matter and the price fall may be limited; removing the tariff also reduces government revenue and exposes domestic producers to more import competition.
Practice question
Using this example, analyse the effects of removing an import tariff on consumers, domestic producers and government revenue.
Read the article ↗ · Draw the diagram in the Diagram Lab
Where it fits in the syllabus
- Tariffs and protectionism: Tariffs, quotas and similar barriers that shield domestic producers, at the cost of higher prices and possible retaliation.
- Taxes, subsidies and price controls: Indirect taxes, subsidies and maximum or minimum prices that governments use to change market outcomes.
- Supply, demand and prices: How a change in demand or supply in one market moves its equilibrium price and quantity.
- IB Economics: International Trade, Government Intervention and Market Failure, Demand, Supply and Elasticity
- A-Level Economics: International Economics, Government Microeconomic Intervention, Supply and Demand
- AP Macroeconomics: Open Economy: International Trade and Finance
- AP Microeconomics: Supply, Demand and Market Equilibrium, Market Failure and the Role of Government
- IGCSE Economics: International Trade and Globalisation, Government Intervention, Demand and Supply