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Economic Integration 1. Economic integration refers to the merging of national economies and the blurring of the boundaries that separate economic activity in one nation state from another. In addition, the use of boundaries by a nation state will reduce economic efficiency. Examples of boundaries include * The use of tariffs, which will lead to an increase in the price of imports. The increase in prices will decrease consumer demand and will stimulate domestic supply. * Quotas have the same affect as tariffs, where it will limit imports and hence raise the price level. * Government subsidies will lead to a domestic price decrease. The use of the subsidy will lower domestic prices from Pe to P1. Therefore, with domestic prices it will encourage domestic consumers to purchase their goods and services domestically and not on the European Market. There are also five levels of economic integration; firstly, there is a Free Trade Area,...

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