Question 6 Answer

Import levels are affected by:

-Domestic income: the higher the level of income the greater the demand for variety of goods/superior goods which might not be available locally or are under-produced.

-Domestic prices: if higher compared to imports consumers will demand more import goods than local goods especially if the substitutes are available overseas. This is especially true in cases where there are free trade and no tariffs are placed on imports.

-Exchange rates: if local currencies are higher compared to foreign ones, prices of imports will become cheaper than exports and hence the demand for imports will increase.

-Taste of consumers: as a result of the internet, advertising and telecommunication development consumers become aware of foreign goods and services and develop a taste for these goods resulting in demand for imports. Western culture seems to determine the trend in fashion, food etc and hence they create a desire for these foreign goods and services.

-Tariffs and Custom duties: when governments impose taxes and duties on foreign goods and services it raises the prices of these goods making them more costly and those with limited income may reconsider purchasing these imports.

(Students must discuss how these factors affect consumer demand for imports in their country)

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