Question

Brazil is implementing a fair trade law within the coffee industry. It requires all buyers of coffee to pay a minimum of $1.50 per pound for raw unroasted coffee. Currently unroasted coffee is bought by market intermediaries who but coffee for $0.30-$0.50 a pound for workers who are not fair trade and $1.26 per pound for workers who are fair trade. For Brazil this would mean that all growers could be fair trade certified.

During the next year, coffee prices are expected to go up related to a shortage of usable beans. This shortage will affect all countries. Does it make sense for Brazil to implement a fair trade law? Discuss the different price controls Brazil could use and what their implications are for the coffee market.

Which of the price control options is best? Be sure to consider all stakeholders when making your decision.

Answer 1

Answer explained below

Step-by-step explanation:

Yes, it makes sense for Brazil to implement a fair trade law. because increase in price of coffee beans may affect the developing countries, so a trade law may somehow would benefit the developing countries.

two price controls can be: price ceilings or price floor.

price ceilings can be used for the maximum amount of price that can be charged. price floor can be used for the minimum price that can be charged.

price ceilings can be the best option because the producer may charge higher price for their profits. so a price ceiling will restrict the producer to a level up to which amount they can charge the price which will benefit the trade law and the developing countries.