Explain why the produce from tropical plantations are profitable to the local communities that grow them, but not as profitable as finished goods.

Answer 1

Tropical plantations produce goods such as coffee, cocoa, bananas, and sugar that have high demand in global markets. These goods provide income for local communities, which can then be used to improve their standard of living. However, the profits earned from selling these raw materials are not as high as the profits earned from producing finished goods. This is because finished goods have a higher value-added component due to the manufacturing process involved in transforming raw materials into final products.

For instance, coffee beans are grown in tropical regions and sold to coffee manufacturers who roast, grind, and package the beans to sell to consumers. The manufacturer earns a much higher profit margin because of the additional work involved in processing the beans. Similarly, bananas grown in tropical regions are sold to supermarkets and retailers who package and distribute them to consumers. The supermarket earns a higher profit margin because of the additional work involved in transporting and displaying the bananas.

In summary, while the production of tropical goods provides income to local communities, the profits earned from selling raw materials are not as high as the profits earned from producing finished goods. This is because the manufacturing process adds value to the raw materials, increasing the final price and providing higher profit margins.