ECS3702 Assignment
2 (COMPLETE
ANSWERS) Semester
2 2024 - DUE 6
September 2024
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, ECS3702 Assignment 2 (COMPLETE ANSWERS)
Semester 2 2024 - DUE 6 September 2024
Course
International Trade (ECS3702)
Institution
University Of South Africa (Unisa)
Book
International Economics
ECS3702 Assignment 2 (COMPLETE ANSWERS) Semester 2 2024 - DUE 6
September 2024 ; 100% TRUSTED Complete, trusted solutions and
explanations. Ensure your success with us...
Question 1A Use the hypothetical information in the table below to answer the
questions that follow: Output/hr Unos Tres Cellphones (ton/hr) 18 6 Candles
(ton/hr) 6 8 (i) Identify the product of absolute advantage and disadvantage for
both Unos and Tres. Explain your answer. [4 marks] (ii) From your answer in
(i) above, explain whether trade is possible and explain the pattern of trade
according to the theory of absolute advantage. [4 marks] 2 (iii) Determine the
commodity of each nation’s comparative advantage and disadvantage. No
marks will be awarded if you do not show your workings. [6 marks] 3 (iv) From
your answer in (iii) above, explain whether trade is possible and the pattern of
trade according to the theory of comparative advantage. [6 marks] [20]
QUESTION 2 [25 marks] Assume that Unos is a capital-abundant country and
Tres is a labour-abundant country. Assume they produce two goods, candles
which are labor intensive in their production and cellphones which are capital-
intensive in their production. Answer the following questions. (i) In which
country will the relative price of cellphones be lower? Explain. [2 marks] (ii)
Explain briefly what happens in both countries to (a) the production of candles
and cellphones 4 (b) the demand for labour and capital (c) the wage and
interest rate and (d) the pre-trade differences in wages and interest rates as
trade occurs. [8 marks] (iii) Unos is a capital abundant nation, and Tres is a
labour abundant nation, producing and consuming candles and cellphones,
using both labour and capital. Candles are 5 labour intensive, and cellphones
are capital intensive in their production. Explain, using diagrams, the basis of
and gains from trade for both countries given their differing resource
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