Which of the following is a main economic variables that affect business cycles?
2 answers:
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Answer:
a) Jean b) Jean c) Vincent d) Jean
Step-by-step explanation:
We are given the following information in the question.
Vincent can bake 10 cakes or make 5 pizzas
Jean can bake 12 cake or make 8 pizzas.
a) Absolute advantage of baking cake
Jean has the absolute advantage of baking cake as he can bake more cakes as compared to Vincent.
b) Absolute advantage of making pizza
Jean has the absolute advantage of making pizza as he can make more pizzas as compared to Vincent.
In order to find comparative advantage, we find the opportunity cost which can be defined as:
c) Comparative advantage in baking cakes
Opportunity cost of Vincent for baking cakes =
Opportunity cost of Jean for baking cakes =
The less is the opportunity cost the better, hence, Vincent has comparative advantage in baking cakes.
d) Comparative advantage in making pizzas
Opportunity cost of Vincent for making pizzas =
Opportunity cost of Jean for making pizzas =
The less is the opportunity cost the better, hence, Jean has comparative advantage in making pizzas.