Key Diagrams - Import Quotas

An import quota is a limit on the total quantity of a product can be supplied to a market.

An import quota therefore restricts the supply of an imported product

By cutting market supply, the price of the imported product is likely to rise and black markets may develop. Quotas limit market access to imported products.

An import quota is a non-tariff barrier.

An embargo is a zero-quota meaning that no imports of a specified product are permitted. A good recent example of this is Nepal banning imports of non-essential products to help control the loss of foreign exchange from their economy. (April 2022)

Quotas will reduce the volume (quantity) imports, and help domestic suppliers because they can now sell more at a raised price.

However, they will lead to higher prices for consumers and could lead to retaliation with other countries placing tariffs or other restrictions on exports.

Build your analysis to help your evaluation by showing the possible economic welfare loss from strictly enforced import quotas.