How a Quota Works
- A quota is a physical limit on imports e.g. in June 2022 the UK extended its quota on steel imports for a further two years in order to protect employment in the domestic steel industry
- This limit is usually set below the free market level of imports
- As cheaper imports are limited, a quota raises the market price
- As cheaper imports are limited, a quota may create shortages
- Some domestic firms benefit as they are able to supply more due to the lower level of imports
- This may increase the level of employment for domestic firms