The author suggests a possible solution to the prevailing trade deficit of Sacch ar and goes on to explain the reasoning

behind the solution. The author suggests that a possible solution to the trade deficit problem would be to lower the pri ce of Sacchar's primary export product which is sugar. She goes on to explain th at lowering the price of Sacchar's sugar would enable the country to attract mo re buyers and hence compete better in the international market against other sug ar esporting countries, thus reducing Sacchar's trade deficit. The author's sugg estion to the problem is correctly justified. Trade deficits occur as imports of a country exceeds the exports of that country . The primary export commodity of a country brings the largest portion of the co untry's export proceedings and therefore has a substantial effect on the balance of trade of that country. Since sugar is the primary export commodity of Saccha r, lowering the price of sugar in the international market would attract more bu yers therefore generating higher export revenues and improve the balance of trad e situation. As the balance of trade depends on the net value of export and impo rt, a rise in the export value would counter the nugative effect of import on th e balance of trade and thus help to reduce the tarde deficit. This can be furt her explained by the fundamental relationship between price and demand; as the p rice of a commodity falls the demand for that commodity rises and vise versa. Al though there are multiple factors affecting a commodity in the international tra de market, the price of a commodity is the single most influential factor among them. For example the export proceeding of country A is 100 dollars and its impo rt is 200 dollars, thus according to the balance of trade formula the situation yeilds a trade deficit of 100 dollar. If the export rises to a 150 dollars and i mport remains at 200 dollars, the situation would yeild a trade deficit of 50 do llars therefore improving the trade deficit situation. Also, the reduction in pr ice would be offset by the raising volume of demand to yeild a net gain in reven ues. Even though sugar is a necessary good and therefore entails the properties of price inelasticity whereby reduction in price would not cause significant ris e in volume of demand, the commodity acts as a normal good in the international market and therefore a reduction in its price would effect the generation of a g reater volume of demand. In conclusion, the author's solution to the problem, which involves reducing the price of sugar in the international market to solve the trade deficit problem, is correctly justified as reduction in the price of sugar would raise the demand for sugar in the market therefore giving Sacchar a competitive edge over other sugar exporting countries an thus succeed in attracting more buyers. This in tur n would lead to higher export revenue.