40.        The author of this article argues that the country of Sacchar can best solve its
current trade deficit problem by lowering the price of its main export, sugar. The line of
reasoning is that this action would make Sacchar more competitive with other sugar-
exporting countries, thereby increasing sales of Sacchar's sugar abroad and, in turn,
substantially reducing the trade-deficit. This line of reasoning is unconvincing for a
couple of reasons.
      In the first place, this argument is based on an oversimplified analysis of the trade
deficit problem Sacchar currently faces. A trade-deficit occurs when a country spends
more on imports than it earns from exports. The author's argument relies on the
assumption that earnings from imports will remain constant. However, the author
provides no evidence that substantiates this assumption. It is possible that revenues from
imports will increase dramatically in the near future; if so, the course of action proposed
by the author might be unnecessary to solve Sacchar's trade deficit problem. Conversely,
it is possible that revenues from imports are likely to decrease dramatically in the near
future. To the extent that this is the case, lowering sugar prices may have a negligible
countervailing effect, depending on the demand for Sacchar's sugar.
      In the second place, increasing sales by lowering the price of sugar will not yield
an increase in income unless the increase in sales is sufficient to overcome the loss in
income due to the lower price. This raises three questions the author fails to address.
First, will a price decrease in fact stimulate demand? Second, is demand sufficient to
meet the increase in supply? Third, can Sacchar increase the sugar production
sufficiently to overcome the deficit? In the absence of answers to these questions, we
cannot assess the author's proposal.
      In conclusion, the author provides an incomplete analysis of the problem and, as a
result, provides a questionable solution. To better evaluate the proposal, we would need
to know how revenues from imports are likely to change in the future. To strengthen the
argument, the author must provide evidence that demand is sufficient to meet the
proposed increase in supply, and that Sacchar has sufficient resources to accommodate
the increase.