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hi everybody weve understood how a tariff works lets now understand how an import quota works we know what a quota is its a quantity limit placed on the number of imports coming into a country lets analyze how a quota impacts on a market so again we start it with free trade or is it good starting point for these protectionism diagrams q1 is a domestic supply at the price PW q2 is a domestic demand and the price PW or all happy with that lets now assume that an import quota was put in place by the government and then say that quota was set at what a cute three so previously q1 q2 the difference between the two the number of imports coming into the country I was the excess demand now the government is saying now only up to q3 or the level of imports allowed so before q1 q2 imports now only q1 q3 so the level of imports quantitative what is now capped a q1 q3 um okay what does that do it leaves an excess demand isnt it of Q 3 and Q 2 and normally excess demands and free trade will