Scenario:
China and India are two countries involved in the production of motorcycles and shoes. The unit labour requirements of the two goods in each country are shown below.
Required:
Question1: Make a distinction between absolute and comparative advantage.
Question 2: Which country has the absolute advantage in production of each commodity?
Question 3: Evaluate the opportunity cost of motorcycles in terms of shoes and of shoes in terms of motorcycles for each of countries.
Question 4: Which country has the comparative advantage in production of (a) Motorcycles; and (b) shoes?