Quotas3

Quotas3

Quotas. (a) In the economics of international trade, a method of protecting home industries from foreign competition or of reducing pressure on the balance of payments by limiting imports. For protection the quota is more certain than a tariff in its effects on the quantity of imports. Both will generally cause a rise in price in the home market for the imported goods. The object of the tariff is to raise the price of the import and reduce the demand for it; the object of the quota is to reduce the supply of the imported good in the home market, so that its price will tend to rise, in both cases demand will be diverted towards the products of the home industry that competes with the import. When a tariff is used the Government gains revenue from the imported good: an increase in price due to a quota is likely to benefit either the foreign producer or the domestic importer by raising revenue per unit sold. A government imposing quotas may be able to share in the gains by marketing the commodity itself. Alternatively, having imposed a limit on the quantity that may be imported, it may auction to the highest bidder the right to import the commodity.

(b) In cartels and in international commodity control agreements, a quota is a stated amount of output allocated to member firms or nations up to which they are allowed to produce and sell. The purpose is usually to increase prices and profits or reduce fluctuations in them.

Rack Rent, the full (market) rental value of land and buildings as determined by the demand for them and their supply. The rent paid under a lease may often be less than the full rack or market rental value of the premises, e.g. if a capital sum ('premium') has been paid, or if rental values of comparable property have risen during the lease. Conversely, the term is used as a criticism to mean exorbitant' rentals such as might emerge during a period of exceptionally high demand for houses, fiats or land. At such times competition among, say, tenant farmers may lead them to offer or accept higher rentals than they would need to pay if the pressure of demand were less or when the supply were increased.

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