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    Help with this question please. I know the answer from the mark scheme but I just need an explanation please.
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    (Original post by blueberryyums)
    Help with this question please. I know the answer from the mark scheme but I just need an explanation please.
    A2 student... and I am puzzled... hmm
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    Is the answer C

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    (Original post by N_young)
    A2 student... and I am puzzled... hmm
    Same... what exam board is this? I got an A at AS and I haven't got a clue!
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    C?
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    Quiet clearly county 1 has a comparative advantage to produce good Y because they'll have to give up 0.5 x to produce 1 Y while country 2 will have to give up 0.75 x to produce 1 Y.

    So lets say Country 2 tells Country 1 "I'll give you one X for 1 Y"
    This is clearly desirable for Country 1 because in order to make 1 X they'll have to give up 2 Ys but now they can trade and give up 1 Y for X.
    But think about country 2. Why would they give up one X for one Y when they can give up 0.75x for one Y and produce it them selves.
    Therefore option a 1Y=1X is not desirable...


    Carry the same philosophy for the rest of the options.


    The answer is C.
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    (Original post by Undisclosed 15)
    Is the answer C

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    (Original post by Homeboy Hotel)
    C?
    (Original post by dan94adibi)
    Quiet clearly county 1 has a comparative advantage to produce good Y because they'll have to give up 0.5 x to produce 1 Y while country 2 will have to give up 0.75 x to produce 1 Y.

    So lets say Country 2 tells Country 1 "I'll give you one X for 1 Y"
    This is clearly desirable for Country 1 because in order to make 1 X they'll have to give up 2 Ys but now they can trade and give up 1 Y for X.
    But think about country 2. Why would they give up one X for one Y when they can give up 0.75x for one Y and produce it them selves.
    Therefore option a 1Y=1X is not desirable...


    Carry the same philosophy for the rest of the options.


    The answer is C.
    :no: The mark scheme says B though... :confused:
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    (Original post by hrbrox)
    Same... what exam board is this? I got an A at AS and I haven't got a clue!
    This is CIE.

    I just have no clue on Comparative and Absolute Advantage calculations.
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    (Original post by blueberryyums)
    This is CIE.

    I just have no clue on Comparative and Absolute Advantage calculations.
    Ah, I do AQA which is all theory so neither do I. Sorry couldn't be more help
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    In understanding the theory I would suggest:
    1) Make sure you completely understand opportunity cost.
    2) Know the definitions of both the Absolute and Comparative Advantages. The definition of the Absolute Advantage should basically tell you how to calculate it.
    3) Look at as many examples of calculations as possible.

    This may help you, he has some other videos for other topics that you may need help with.

    http://www.youtube.com/watch?v=Pd_qs8ueIWw

    I hope this can help you. I've only read the last comment so sorry if what I've said isn't sequential.
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    (Original post by blueberryyums)
    :no: The mark scheme says B though... :confused:
    Oh yh of course. I read option B incorrectly.

    Ok country 1 will have to give away
    200Y to make 100 X
    or in other words the'll have to give up 0.5x to make one Y

    On the other hand country 2 will have to give away
    400Y to make 300X
    or in other words the'll have to give up 0.75x to make one Y

    So since the opportunity cost for country 1 is lower to produce Y then country 2 will produce X.

    Now lets take 1X=1.5Y

    Country 1 will tell country 2 "I will give you 1.5 Y for 1X"
    of course if they wanted to make this themselves they would have had to give up 2Y to make 1X (to make one Y they had to give up 0.5x so for 2 you give double it). So country 1 will be happy with this as they are gaining 0.5x by trading.


    On the other hand country 2 will tell country 1 "I'll give you 1X for 1.5Y"
    so 1Y cost them 0.75x so 1.5 so if they were to produce 1.5 Y themselves they would have to give up 1.125x (0.75*1.5) but now they can trade with country 2 and only give one X away (saving 0.125X).

    So both countries benefit and hence 1X=1.5Y is the suitable rate of exchange.
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    (Original post by dan94adibi)
    Oh yh of course. I read option B incorrectly.

    Ok country 1 will have to give away
    200Y to make 100 X
    or in other words the'll have to give up 0.5x to make one Y

    On the other hand country 2 will have to give away
    400Y to make 300X
    or in other words the'll have to give up 0.75x to make one Y

    So since the opportunity cost for country 1 is lower to produce Y then country 2 will produce X.

    Now lets take 1X=1.5Y

    Country 1 will tell country 2 "I will give you 1.5 Y for 1X"
    of course if they wanted to make this themselves they would have had to give up 2Y to make 1.5X (to make one Y they had to give up 0.5x so for 2 you give double it). So country 1 will be happy with this as they are gaining 0.5x by trading.


    On the other hand country 2 will tell country 1 "I'll give you 1X for 1.5Y"
    so 1Y cost them 0.75x so 1.5 so if they were to produce 1.5 Y themselves they would have to give up 1.125x (0.75*1.5) but now they can trade with country 2 and only give one X away (saving 0.125X).

    So both countries benefit and hence 1X=1.5Y is the suitable rate of exchange.

    STOP BEING SO GREAT AT ECONOMICS!! Thank you!! I really understand better. Can I ask for your help occasionally on questions I don't understand please? I am a private candidate at A2 level for my other subjects but new to Econs.
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    (Original post by blueberryyums)
    STOP BEING SO GREAT AT ECONOMICS!! Thank you!! I really understand better. Can I ask for your help occasionally on questions I don't understand please? I am a private candidate at A2 level for my other subjects but new to Econs.
    No problem, I hope you understand better. Its just a simple algebra. You can even write equations if you wanted to.
    e.g.
    200Y=100X
    Y=0.5X (so they'll have to give up 0.5X for 1Y) And quiet clearly when you have to give up something for something else we are talking about the PPF. So this little equation Y=0.5X is the equation for the PPF of country1. You can do the same for Country 2.

    And of course you can; as long as I can handle it.
 
 
 
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