Assignment 1 - Absolute Advantage and Comparative Advantage

G5: 1 Nguyễn Đức Anh 20070085

2 Phạm Đỗ Quỳnh Anh 21070352
3 Nguyễn Việt Hưng 20070205
4 Dương Xuân Đức 21070148
• The following table shows the wheat and cloth that the US and the UK can
produce with one hour of time under this situation.

Labor productivity US UK

Wheat (ton/hour) 6 1

Cloth(ton/hour) 4 3

• Determine which commodity/goods the US and UK have the absolute advantage,

comparative advantage. Calculate the relative cost for each unit of the product.
Identify the pattern of trade if we assume 6 units of wheat equal to 6 units of
cloth. Analyze the gains from trade of each country? Calculate the equivalent time
(hours) gain from trade. Please provide the discussion and conclusion.

W /c 1 /6
The relative cost to produce 1 ton wheat interm of cloth in US: c US = =2/3
1/ 4
W /c 1
The relative cost to produce 1 ton Wheat interm of cloth in UK: c UK = =3
1/3
C /W 1/ 4
c US = =3 /2
1/6
C /W 1/3
c UK = =1 /3
1
W /c W /c
c US < cUK => US has UK in the production Wheat, specialize in production Wheat,
export Wheat, import Cloth
C /W C/W
c US > cUK =¿ UK has CA in production Cloth specialize in production Cloth, export
Cloth, import Wheat.