Explain the difference between absolute advantage and comparative advantage. Which is more important in determining trade between individuals or countries? Is it absolute advantage or comparative advantage? Why?
Let us assume two students must prepare a presentation for their marketing class. As part of their class presentation, they must do a series of calculations and prepare 50 PowerPoint slides. It would take Larry 10 hours to do the required calculation and 10 hours to prepare the slides. It would take Kate 12 hours to do the series of the calculations and 20 hours to prepare the PPT slides.
Let us assume there are only two countries in the world, and the two countries face the following production possibilities frontiers. Further assume that the two countries produce popcorn and peanuts.