Economic Principle: Opportunity Cost, Equilibrium, and Market Scenarios

Running Head: ECONOMIC PRINCIPLE
Economic Principle
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1ECONOMIC PRINCIPLE
Table of Contents
Answer 1..........................................................................................................................................2
Answer 2..........................................................................................................................................2
Answer 3..........................................................................................................................................3
Answer 4..........................................................................................................................................3
Answer 5..........................................................................................................................................4
Answer 6..........................................................................................................................................5
References........................................................................................................................................8

2ECONOMIC PRINCIPLE
Answer 1
Table 1: Number of labor hours required to produce a motorcycle and a guitar in Ireland
and Scotland
One Motorcycle One Guitar
Scotland 15 hours 5 hours
Ireland 9 hours 2 hours
From the above table it is seen that, Scotland can produce one motorcycle using 15 hours of
labor. Ireland however needs only 9 hours of labor for producing one motorcycle. It is therefore
cheaper for Ireland to produce one motorcycle as it needs less labor hours. Ireland thus enjoys an
absolute advantage in producing Motorcycle (Levchenko & Zhang, 2016). In case of Guitar,
Scotland is able to produce one Guitar using 5 hours of labor. Ireland on the other hand requires
2 hours of labor to produce one Guitar. Therefore, Ireland again has an absolute advantage in
production of Guitar.
Answer 2
Table 2: Opportunity cost for motorcycle and guitar in Ireland and Scotland
Opportunity Cost One Motorcycle One Guitar
Scotland 15/5 = 3 5/15 = 0.33
Ireland 9/2 = 4.5 2/9 = 0.22