Question

Your business provides CDs for free to customers who pay for the English courses that you offer in Mexico. You consider the idea of mass production of the CDs in the U.S., so that you can sell (export) them to distributors or to retail stores throughout Mexico. You would price the CDs in dollars when exporting them. The CDs are not as effective without the teaching, but can be useful to individuals who want to learn the basics of the English language.

a. If you pursue this idea, explain how the factors that affect international trade flows (identified in Chapter 2) could affect the Mexican demand for your CDs. Which of these factors would likely have the largest impact on the Mexican demand for your CDs? What other factors would affect the Mexican demand for the CDs?

b. If you believe the Mexican government would impose a tariff on the CDs exported to Mexico, how could you still execute this business idea at a relatively low cost while avoiding the tariff? Describe any disadvantages of this idea that would avoid the tariff.

Answer 1

First will understand whether this independent or dependent on the English Speaking course.

A). Currently as a business operations we are giving free CD to those who are taking the English speaking course,

This gives more opportunities rather selling the CD's alone.

But however if want to have an individual CD business in Mexico then this will initially crucial as the overall demand we have to identify and according to the demand and the need we can think of expansion of the same.

The overall international market of CD's nowadays is not much expanding but due to the unique features of helping in English speaking may leads to the increase demand of the CD in Mexico as well as around the cities.

B). If government impose duty on the import and export of the CD business then it will be obious that the price of the product may rise however looking to the change in taxes and duties we can change the operating expenses so as to minimize the cost of product so as to export to the other cities even after the government impose taxes on the same.

If the tariff will rise then there will be disadvantage of trading into other cities from Mexico and that will give rise to low demand and low supply of the CD.

However with changes in the operation of the business we can avoid that disadvantage and can be get into the current supply of the product.