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- Hi sofia How is new york doing with their eggs and potatoes productions?
- Hi Gaby! We are doing good so far! How is Las vegas doing?
- That's wonderful! We are doing good too! We now take 3 worker days per potato and 7 worker days per eggs
- Wow! That's really good! We actually take 1 worker day per and 5 per potatos.
- WHAT?! HOW?! It seems like New york has an absolute advantage when producing both!
- Yes! We do! But if we look at our relative prices per eggs or potatoes . I bet you have a comparative advantage!
- What does that mean? What is comparative advantage?
- Well it's the relative price of goods, not in terms of labor but in terms goods, between two countries.
- Hmmmm. Do you think you can give me an example?
- Ofcourse! I can actually use our own numbers of the eggs and potatoes productions!
- Okay! Sounds perfect!
- Okay! So We need to calculate the relative cost of eggs in terms of potatoes. Which is 3 worker days per eggs / 7 worker days per potato. That equals .43 potatoes per eggs .
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