Trade & Open Economy · intermediate
What moves on the Tariffs & Protection (Small Open Economy) diagram
A productivity gain shifts domestic supply right against a fixed world price, raising the domestically supplied share and reducing imports without trade barriers.
Domestic supply shows what local firms will produce at each price.
New technology and better logistics cut local production costs substantially.
Domestic supply shifts right while the world price stays put.
Local firms now supply a bigger share of the same domestic consumption, so imports fall without a single tarifftariffA tax on imports, raising their domestic price.. This is competitiveness doing what protection tries to do.
Examiners ask this as: domestic productivity rises, competitive local industry, supply shifts right, import substitution, efficiency gains.
Other scenarios on Tariffs & Protection (Small Open Economy)