Question
An example of an agriculture commodity with particularly volatile prices is coffee. The price of coffee on world markets fluctuates a great deal from year
An example of an agriculture commodity with particularly volatile prices is coffee. The price of coffee on world markets fluctuates a great deal from year to year because of weather and because of the entry of new suppliers in Brazil and new supplying countries such as Vietnam. [1] Who will lose when coffee prices fall as countries become more efficient at growing coffee and begin exporting them? Please explain your answer using the specific-factors model. [2] Can anything be done to avoid the kind of boom-and-bust cycle that occurs regularly in coffee markets? Please specify at least two possible ways to solve this problem. [3] If you are an economist, what trade policy would you suggest the government to protect your coffee farmers by propping up prices?
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