Question

How does protectionism affect the price of the protected good in the domestic market?

Short answer

It increases the price of protected goods in domestic markets.

Step-by-step solution

Definition

Protectionism is a policy adopted by the government to protect the domestic industries from foreign competition. Under this policy various trade barriers can be imposed to restrict imports.

Explanation

Under protectionism, trade barriers such as tarriiffs and quotas can be adopted. These restrictions limit the supply of product in the domestic economy. As a result, the supply of product decreases, causing the price to increase.