Check out our latest Community Poll: ua-cam.com/users/ThinkEconcommunity to weigh in on which videos you'd like to see more of over the summer months! If you DEMAND it, we'll SUPPLY it!
Kindly do a video on how to solve: Consider the table below showing amounts of good x and y that nation 1 and 2 can produce with one hour of labor time N1 N2 X/labor hour 8 4 Y/ labor hour 2 6 (i) Which nation has absolute advantage in cloth and which one has absolute advantage in wheat? (explain your answer) (ii) How much will nation 1 and nation 2 gain from trade if each nation specialised in the production of the commodity of its absolute advantage and exported some of its output for the commodity of its absolute disadvantage, at the exchange of 8X for 8Y. ( Gains to be measured in terms of both units of Y and labor time saved)
This seems like a specific homework question, so we likely won't create a video on this question unless it is in popular demand. Don't worry though, as you can use the exact same principles from this video to find the solution: 1) Calculate Absolute Advantage by setting the labour hours equal and seeing which nation can produce more of each good. 2) This question is framed in a weird way. A nation should specialize and export the good in which they have a Comparative Advantage in producing, not Absolute. The only way that this would be valid is if one nation had both an Absolute AND Comparative Advantage in producing good X or Y. Remember, gains from trade refers to the additional units of good X and Y that are in the economy due to specialization (a nation producing only one good, which they have an advantage in producing), that wouldn't be available if the nations produced both goods X and Y. Does this help?
Check out our latest Community Poll: ua-cam.com/users/ThinkEconcommunity to weigh in on which videos you'd like to see more of over the summer months! If you DEMAND it, we'll SUPPLY it!
A great video! Short and sweet and to the point covering all of the important distinctions between absolute and comparative advantage. Well done!
I'm glad you found it helpful!
Kindly do a video on how to solve: Consider the table below showing amounts of good x and y that nation 1 and 2 can produce with one hour of labor time
N1 N2
X/labor hour 8 4
Y/ labor hour 2 6
(i) Which nation has absolute advantage in cloth and which one has absolute advantage in wheat? (explain your answer)
(ii) How much will nation 1 and nation 2 gain from trade if each nation specialised in the production of the commodity of its absolute advantage and exported some of its output for the commodity of its absolute disadvantage, at the exchange of 8X for 8Y. ( Gains to be measured in terms of both units of Y and labor time saved)
This seems like a specific homework question, so we likely won't create a video on this question unless it is in popular demand. Don't worry though, as you can use the exact same principles from this video to find the solution:
1) Calculate Absolute Advantage by setting the labour hours equal and seeing which nation can produce more of each good.
2) This question is framed in a weird way. A nation should specialize and export the good in which they have a Comparative Advantage in producing, not Absolute. The only way that this would be valid is if one nation had both an Absolute AND Comparative Advantage in producing good X or Y.
Remember, gains from trade refers to the additional units of good X and Y that are in the economy due to specialization (a nation producing only one good, which they have an advantage in producing), that wouldn't be available if the nations produced both goods X and Y.
Does this help?
@@ThinkEcon yes. It was a homework question that had already been submitted. It is also one that has often been repeated from a past exam question.