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Discuss how a coffee producers cartel is in the interest of consumers

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Harpal Chima 13A Economics & Business Studies Discuss how a coffee producers cartel is in the interest of consumers A cartel explained by economists is a method of controlling the supply and demand effect and restricting prices from continual decrease. A cartel is an unlawful association or group of manufacturers or suppliers who get together to maintain high prices and restrict competition. In its simplest terms, a cartel is an agreement between businesses not to compete with each other. The agreement is usually verbal and often informal. Typically, cartel members may agree on: * prices * output levels * discounts * credit terms * which customers they will supply * which areas they will supply Cartels are most successful in areas where there is little competition, the product has no commodities, communication channels between competitors are already established and the industry is suffering from excess capacity or there is general recession. ...read more.


Firstly by creating a cartel it will mean that the consumers will be purchasing products in order to save the livelihoods of poor Brazilian farmers. Although this can be argued that it is not in the interest of consumers it must be considered that consumers would feel better if the purchased a product that saves a farmers life for a whole month providing them food and water. Another factor contributing to the interest that cartels would provide consumers would be the fact that by creating a cartel it may mean that it will reduce supply. By reducing supply it will mean that the main problem in the coffee industry will be solved, this will mean that the consumers will help to cure the problems in a market. Also it will mean that by purchasing coffee they will be able to recognise that they are purchasing a product at a price that is reasonable and will save developing nations. ...read more.


Thus by giving in the producers will then continually rise the price of cocoa as the retailers will have no choice to agree and thus cause problems on a price basis for consumers. The effect of a cartel from the coffee producers on consumers may also mean that the quality of cocoa from the countries that produce high quality cocoa will decrease. This is because as the retailers give in to the demands of the coffee producers it will mean that the countries that develop high quality cocoa will see the fact that retailers will have no choice apart from buying there cocoa. Thus the producers will start to decrease their work effort, as they will notice that whatever happens they will get a continual amount of profit. As work effort decrease it will mean that the producers will care less about the cocoa and thus the quality of the beans will decrease and thus directly effect the interest of the consumers. ...read more.

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