What would happen if Government of India puts a heavy tax on import of Chinese toys? Explain any three points.[CBSE 2012]

If Govt. of India puts a heavy tax on import of Chinese toys then:

1. Increase in the price of import: A heavy tax will increase the amount that the person who is importing has to pay. He shall pay much higher to import the toys.

2. Increase in market price: When import becomes expensive, the market price will also increase automatically. People will then prefer cheaper Indian toys.

3. Reduction in imports: When demand of Chinese toys goes down because of high price, imports will also automatically decrease. This would benefit Indian toy manufacturers.

Note:

Heavy tax is put deliberately by governments to reduce imports. If Indian government puts heavy tax, imports will decrease and this would give a chance to Indian manufacturers to increase production and sales.