Question

guatemala produces an excess supply of coffee but has consumers demanding electronics. mexico generates a large supply of electronics but its market demands more coffee. what would happen if both countries traded?

Answer 1

When trade will be established between Guatemala and Mexico both the countries will be able to fulfill the demands of their consumers.

Trade relations are established between counties in order to fulfill the demands of the consumers. If one country produces a commodity let's say A and another country produces a commodity B and the consumers of country 1 demand commodity B and consumers of country 2 demand commodity A then by establishing trade relations and enabling the supply of commodities both the countries will be able to fulfill consumer demands and also this will establish connections between both the countries on a strategic level. Same will happen in case of Guatemala and Mexico.

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