Applied Business Economics

APPLIED BUSINESS ECONOMICS

In 2005 , imported cars have a great reduction in their tariff . The impact of this economic policy has a connection to economic theory such as on the following

a . Car buyers - As of the latest survey , the locally manufactured Toyota if compared to all the local cars being manufactured locally , gathered the largest market share of over 22 percent and Holden who comes in second gets a 15 percent . Peter Sturrock who is the Chamber of Automotive Industries ' chief executive said that the increased in sales for smaller

and four-cylinder cars has created an impact to the decrease in sales of the larger cars . He said that the trend of patronizing small and imported vehicles is obvious and this will continue indefinitely Obviously , the reduction of tariff of the foreign cars today has resulted into a strict competition in Australia but Sturrock is still positive and stated that everything is good despite their currency 's trading is against the US dollars ' higher levels

But what economic theory is behind the legislation of tariff reduction that it causes so much battle between the local car manufacturers as against the ACCC 's ratification for lowering tariff ? This also related to what are the arguments for imposing tariffs on cars . Let us connect and explain this event based from an economic theory of Gan ,et al , in their book Principles of Microeconomics . Of the ten principles of Economics , trade as they say can make everyone at an advantage . When an individual or a country opens itself up in the international market that event can make somebody lose or win . This is regardless even if the exporting country turned into an importer . In both cases , what the winners gain is more than what the losers has lost and so the winners could recompense for the losers and still has gained . In other words trade is advantageous to both parties . But is this always the case Maybe not . It is very rare that compensation for the losers in an international trade really happen . If there would be no compensation for the losers then those winners may have the option to expand their economic pie in the international trade leaving such a small slice to the smaller participants and ends up with a disintegration of their economy

Now we have an idea why there is a continuous argument over trade policy . When a policy made gainers and losers , then political debate is unavoidable . Countries usually are not happy with this kind of trade because they may be caught off-guard and not ready for such competition and come out as losers . The losers may evolve into political lobbyists and will turn against trade restrictions such as tariffs

The effect of tariff would have no effect if a country is also exporting its goods just like in Australia . If Australia does not import cars then a tariff on foreign cars is irrelevant to them . This tariff matters only because they are now importing cars that...