Rent Seeking occurs when a company, organization or an individual spend their own wealth on political lobbying to obtain economic gains which are beneficial to none apart from themselves. The distinguishing features of Rent Seeking activities are: • Influences government policies to the benefit of the rent seeker • Discourages productivity in the economy • Just involves redistribution of surplus from one party to other i.e. no creation of wealth • Negative Sum Game: Real GDP falls as no creation of value + administrative costs to the government which is an added expense Rent Seeking has several unfavourable implications. Some of them are: • Income Inequality: Surpluses of the weaker sections of the society are transferred to the stronger sections • Lower efficiency: Greater incentives to rent-seek and being profitable rather than being more productive and profitable. • Reduced Competitiveness: leads to high prices due to monopoly power of suppliers …show more content…
As a result of which government has levied tariff rates as high as 200-300% on the imported dairy products to Canada. Imports are thereby discouraged much to the advantage of domestic dairy farming community. Consequently, due to restricted imports and due to quota system present in dairy farming, the current supply of dairy products is limited due to which Canadian citizens are paying higher prices for these goods. However, they are not reacting highly unfavourably as it constitutes a minor part of their household budget. Due to high tariffs on import, the average per unit price of dairy imports (4.4 USD) is almost double the per unit price of export (2.6 USD). Our