Question
Consider the following Table 1 which represents labour time (in minutes) requirements for the production of a unit of commodity X and Y by country A and B, and answer the questions that follow:
Table 1: Labourtime (in minutes) requirement for production of a unit of Good X and Y by Country A and B
| Commodity X | Commodity Y | |
| Country A | 20 | 20 |
| Country B | 30 | 60 |
(i) Which country among A and B has absolute advantage in producing commodity X and which has in producing commodity Y? Give reason. 3
(ii) Which country among A and B has comparative advantage in producing commodity X and which has in producing commodity Y? Give reason. 3
(iii) Suppose after trade each country specialises in production of commodity in which it has a comparative advantage, which country will specialise in producing commodity X?
Answer :
Word Count : 505
Let's break this down step by step: ### (i) Absolute Advantage: - Absolute Advantage refers to the ability of a country to produce a good using fewer resources (in this case, less labor time) than another country. - Commodity X: - Country A: 20 minutes - Country B: 30 minutes - Country A has an absolute advantage in producing commodity X because it requires fewer labor minutes (20 vs. 30) compared to Country B. - Commodity Y: - Country A: 20 minutes - Country B: 60 minutes - Country A has an absolute advantage in producing commodity Y as well, since it requires fewer labor minutes (20 vs. 60) compared to Country B. ### (ii) Comparative Advantage: - Comparative Advantage refers to the ability of a ____ ________ ___ _________ _____ _________ _____ ___.
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Let's break this down step by step: ### (i) Absolute Advantage: - Absolute Advantage refers to the ability of a country to produce a good using fewer resources (in this case, less labor time) than another country. - Commodity X: - Country A: 20 minutes - Country B: 30 minutes - Country A has an absolute advantage in producing commodity X because it requires fewer labor minutes (20 vs. 30) compared to Country B. - Commodity Y: - Country A: 20 minutes - Country B: 60 minutes - Country A has an absolute advantage in producing commodity Y as well, since it requires fewer labor minutes (20 vs. 60) compared to Country B. ### (ii) Comparative Advantage: - Comparative Advantage refers to the ability of a ____ ________ ___ _________ _____ _________ _____ ___.
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