ch33a-additional notes - ADDITIONAL NOTES ON Absolute and...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
ADDITIONAL NOTES ON Absolute and comparative advantage and Terms of Trade – Chapter 33a Example 3a : determine absolute and comparative advantage Output per worker Opportunity cost Wheat Cloth 1 kg of Wheat 1m Cloth Canada 12 kg 3 metres ¼ m (see 2A) 4kg W (see 1A) China 4 kg 2 metres ½ m (see 2B) 2 kg of W (see 1B) CANADA (To find 1A) Let Canada re-allocate 1 worker from producing wheat (W) to producing cloth (C) kg 12 W - = and m 3 C + = Opportunity cost for Canada of producing more cloth m 1 kg 4 m 3 kg 12 C W + - = + - = = Canada sacrifices 4 kg of W to get 3 m of C CHINA (To find 1B) Let China re-allocate 1 worker from producing wheat (W) to producing cloth (C) kg 4 W - = and m 2 C + = Opportunity cost for China of producing more cloth m 1 kg 2 m 2 kg 4 C W + - = + - = = China sacrifices 2 kg of W to get 1 m of C China sacrifices fewer kg of W to produce 1 m of C AND China has a comparative advantage at producing CLOTH. CANADA
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 01/17/2012 for the course ECONOMICS 120 taught by Professor Mesta during the Fall '10 term at Wilfred Laurier University .

Page1 / 3

ch33a-additional notes - ADDITIONAL NOTES ON Absolute and...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online