determining the differences between comparative and absolute advantage as well as graphing elasticity curves.
A. Trade: You are given the following production data which shows output per worker in two different industries in Canada and Mexico: Canada Mexico Wheat 12 3 Corn 4 2 a) Which country has an absolute advantage in wheat production and corn production? Explain why?
b) Which country has a comparative advantage in wheat production? and explain why?
B. Supply and Demand: For the following events, show the shift in demand and/or supply and the change in equilibrium price and equilibrium quantity a) Manufacturers of digital cameras reduce the prices of their camera. What happens to the market for color printers (Hint: complement or substitute goods)?
b) Suppose an improvement in technology allows firms to use less labor in the production of disposable ballpoint pens. Show what happens to the market for disposable ballpoint pens
C. Elasticity a. If income increases from $50,000 to $60,000 while the demand for a good increase from 100 units to 125 units, what is the income elasticity of demand? Is the good a normal good or an inferior good? Answer:
b. Suppose the quantity supplied of computers increases from 2 million to 4 million units as the price of a computer increases from $600 to $700. What does the price elasticity of supply.