Nick and Beth run a catering business in which they have two major tasks: getting new clients and preparing food for events and
parties. It takes Nick 8 hours to prepare food for an event and 4 hours of effort to get each new client. For Beth, it takes 12 hours to prepare food for an event and 3 hours to get a new client. 1. Who has an absolute advantage in food preparation?
2. Who has a comparative advantage in food preparation?
Suppose that initially, Nick and Beth are both splitting both tasks for a large number of events. Then they decide to start shifting some work according to the principle of comparative advantage. In particular, the person with the comparative advantage in food preparation will take over preparing food for one more event, and the other person will use the freed-up time to get more clients. As a result, the total number of events for which food is prepared will remain unchanged, but the number of new clients will increase by __?__.
The second part threw me off and I got confused. I put up the entire problem just to see if i answered it correctly or not to see whether that was what threw me off or not. Thanks in advance! :)
A company has absolute advantage in the production of a good or service if it produces more quantity of a good when compared to other countries
Nick prepares food in 8 hours while Beth produces the food in 12 hours. ick thus has an absolute advantage in food preparation because he produces food in less time
A country has comparative advantage in production if it produces at a lower opportunity cost when compared to other countries.
Opportunity cost of Nick in food preparation = 4/8 = 0.5 hours
Opportunity cost of Beth in food preparation = 3 / 12 = 0.25 hours
Nick has a comparative advantage in food preparation
An augmented product has been improved by its seller with added features or services to recognize it from a similar product offered by its rivals. Augmenting a product includes adding intangible benefits or additional items that go past the product itself.
The actual product is the core product, whereas given by the Plezion Movie Palace to its customers is the augmented product.
