21.02.

2022

ECON 294

Chapter 2

Comparative advantage

Fish Vegetables
Ahmet 10 10
Hakan 4 2

Ahmet has absolute advantage in both Fish and Vegetables, because he spends less time for collection
of them.

Comparative advantage:

Fish

Ahmet: 10F = 10V, 1F = 1V Opportunity cost of every fish for Ahmet is 1V

Hakan: 4F = 2 V, 1F = 2/4V = 0.5V Opportunity cost of every fish for Hakan is 0.5V

Hakan is giving up less vegetables for every Fish, therefore he has a comparative advantage in catching
Fish. So Hakan is going to specialize in Fish production (more than half of his production will be related
to Fish).

Vegetables

Ahmet: 10V = 10F, 1V = 1F Because Ahmet gives up less Fish for collection of every vegetable, he has a
comparative advantage in production of Vegetable. So Ahmet is going to specialize in Vegetables
production (more than half of his production will be related to Vegetables).

Hakan: 2V = 4F, 1V = 4/2F = 2F