1. Explain the difference between comparative advantage and absolute advantage? Can a country has a...

Question

1. Explain the difference between comparative advantage and absolute advantage? Can a country has a comparative advantageand absolute advantage in two goods at the same time compared to another country?

2.Refer to the table below for two countries: Canada and Mexico who produces tables and chair with their given resources and technology.

	Labor hours needed to make1 unit of Table	Labor hours needed to make 1 unit of Chair
Canada	2	3
Mexico	1	4

Based on the table calculate/explain (make sure to show all the math)

Which country has an absolute advantage in tables and which country has an absolute advantage in chairs?
Which country has a comparative advantage in tables and which country has a comparative advantage in a chair?
After the trade, which country should export tables to the other country? Also which country should be exporting chairs to the other country?

3. Explain the determinants of demand and determinants of supply. Further, also explains what causes a movement along a fixed demand/supply curve and what causes a shifting in demand/supply curve?

4. Distinguish between the surplus and shortage and provide a real-world example of both.

Komalavalli · Accepted Answer

Q1
Absolute Advantage
A country has an edge over another country when it consumes fewer resources to create that item. The consequence of a country's natural donation may be an absolute benefit. In Saudi Arabia, for example, oil extraction is almost "boiling the hole." Oil production might need significant exploration and costly drilling and extraction technology in other nations if they really contain any oil.
Comparative Advantage:
A comparative advantage is a country’s capacity to produce a certain item or service at less opportunity cost than another.
Q2.
	 
	Labor hours needed to make1 unit of Table
	Labor hours needed to make 1 unit of Chair
	 
	 
	 
	Canada
	2
	3
	Mexico
	1
	4
From above table we can say that Mexico has absolute advantage in producing Table and Canada has absolute advantage in producing Chair.
Opportunity cost
	 
	OC Table
	OC Chair
	Canada
	0.67
	1.5
	Mexico
	0.25
	4
From above table we can say that Mexico has comparative advantage in producing Table and Canada has comparative advantage in producing Chair
Therefore Mexico will export table and import chair; Canada will export chair and import table.
Q3
Determinants of demand are Good pricing or service price, Buyers' revenue, the costs of the products or services concerned are either supplementary and bought together with a certain item, or alternatives and acquired instead of a product, Consumers' tastes or preferences will increase demand, Expectations of the consumer: This relates most commonly to whether a consumer feels that the price of the product in future will climb or decrease.

1. Explain the difference between comparative advantage and absolute advantage? Can a country has a comparative advantageand absolute advantage in two goods at the same time compared to another...

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