Answer to Question #96129 in Microeconomics for Sana

Question

Discuss the ways in which the international coffee organisation might be able to make the price of cofee beans more stable.

Answer 1

International coffee agreement is required for the prices of the coffee to remain stable in the world market. It balances the supply and demand of coffee to keep control over the price of coffee in the international market. A policy of export quotas are conducted when required to achieve price steadiness, quotas are discontinued if prices rise above certain limits and are continued again if prices reduce below the limits. The supply is reduced by keeping coffee in stock and due to less supply and given demand, the pressure on prices increases such that the price gets stabilized in the market. Opposite happens when the coffee from the export is supplied in the market, with increased supply and given demand, the extra coffee could be sold by lowering down the prices. Importing countries are also asked to impose import quotas such that the demand in the importing countries is not able to be balanced by the equal supply, which further increases the price of coffee, import quotas are decreased to decrease the prices of coffee.