Comparative Advantage (Input) Problem 1995 Step by Step

 Comparative Advantage (Input) Problem 1995

1.     Determine  - if it an Output or Input problem?

2.     Draw a Graph/PPC  - of the problem.

3.     Recognize  - who has Absolute Advantage?

4.     Compute  - Comparative Advantage?

5.     Redraw the Table  - (if needed) with people/countries on the left and goods on the top.

6.     Do the math - Input problem so the math is (Under).

7.     Find/ Mark/Bubble in the right answer.

8.     Dirty quick method - Cross Multiply after arranging the Table correctly and find the smaller number.

9.     Go back and check  - to make sure you did everything right

 

1995

1.     Determine  - if it an Output or Input problem?

Input questions have (1 unit of X) as what is produced, that can be (1 ton of wheat) or (one pair of shoes) or in this instance (1 unit of food) or (1 unit of clothing)

 

What are variable are the resources used in producing the (1 unit of food) .

 

Output problems  - inputs/resources used in production of the good are (fixed/equal resources) the amount actually produced is (variable)

 

Input problems – inputs/resources used in production of the good is (variable) the amount actually produced is (fixed).

Lets say it a different way.

 

In the above question – Country X used 20 resources to produce (1 unit of food) while Country Y used 10 resources to produce (1 unit of food).

 

The resources used to produce are (different/variable) while what is produced is fixed (1 unit of food) so this is an Input Problem.

Lets say it a different way.

If what goes in is variable it's an Input problem

If what comes out is variable it's an Output problem

2.     Draw a Graph/PPC  - of the problem.

3.     Recognize  - who has Absolute Advantage?

As it is an input problem Country Y is the most efficient and has absolute advantage in producing both Food and Clothing.

 

Lets say it as simply as possible:

If it’s an Output problem who ever produces the most has absolute advantage but if it’s an input problem who ever produces using the least resources has absolute advantage.

In this Input problem Country Y has absolute advantage in food and clothing as it can produce both goods using the least amount of resources.

4.     Compute  - Comparative Advantage?

 

It's an Input problem so Input problems the math is Under

after moving the numbers under you need to divide.

Then look in the columns and recognise whoever has the lowest opportunity cost

is who should produce the good as they can produce it with the lowest

amount of resources used.

7. Find/ Mark/Bubble in the right answer.

8.     Dirty quick method - Cross Multiply after arranging the Table correctly and find the smaller number for an Input problem.

9.     Go back and check  - to make sure you did everything right