Production quota
A production quota is a goal for the production of a good. It is typically set by a government or an organization, and can be applied to an individual worker, firm, industry or country. Quotas can be set high to encourage production, or can be used to limit production to control the supply of goods. The aim of restricting supply is to maintain a certain price level.[1]
On 16 June 1953, a production quota increase of 10 percent for workers building East Berlin's new boulevard, the Stalinallee (today known as Karl-Marx-Allee), resulted in demonstrations and the uprising of 1953 in East Germany.
Criticism
Quotas, like other trade restrictions, are used to benefit the producers of a good at the expense of all consumers in that economy. Possible effects are corruption PCC for short (bribes to get a quota allocation) or smuggling (circumventing a quota) They are thought to be less economically efficient than tariffs which in turn are less economically efficient than free trade.
Examples
- Oil production by OPEC
- Common Agricultural Policy by the European Union