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Overview

An import quota sets a quantitative limit on the sale of a foreign good into a country.

The limits are usually imposed on the quantity of imports but are also sometimes imposed on the value of imports that can be purchased each year.















The imposition of a quota at Q2 reduces the supply of the import from S1 to S2 (where supply is perfectly price inelastic). This leads to the price of the import rising from P1 to P2, and output falling from Q1 to Q2

Disadvantage to the consumer

The quota limits the quantity imported and thus raises the market price of foreign goods So, quotas are likely to disadvantage consumers as they result in them paying higher prices and consuming fewer products.

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Quotas

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