ECO10004: Economic Principles Assignment 1A
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Task 1: Economic foundations and market forces
One Motorcycle
One Guitar
Scotland
15 Hours
5 Hours
Ireland
9 Hours
2 Hours
Table 1: Number of labour hours required to produce a motorcycle and a guitar in Ireland and
Scotland.
Question 1. From the information provided in Table 1, which country has an absolute advantage in
the production of motorcycles? Which country has an absolute advantage in the production of
guitars? Explain. (1 mark)
The information provided in Table 1 shows that absolute advantage for motorcycle production is in
Ireland. Ireland’s cost per unit for producing a motorcycle is 9 hours of labour while Scotland’s is 15
hours, the 6 hours difference grants Ireland the absolute advantage. Ireland holds absolute
advantage in guitar production as their labour hours are 2 hours compared to Scotland’s 5 hours for
a guitar. Absolute advantage is defined as the ability for a country to produce a product at a lower
cost per unit then another country (Investopedia 2018).
Question 2. From the information provided in Table 1, what is Ireland‘s opportunity cost of producing
one motorcycle? Explain. What is Scotland’s opportunity cost of producing one motorcycle?
Explain. (2 marks)
The calculation for opportunity cost for producing one motorcycle in Ireland is:
Hours of producing one motorcycle divided by the hours of producing one motorcycle
In a mathematical way it would look like:
9 ÷ 2 = 4.5.
Therefore, Ireland can produce 4.5 motorcycles.
The opportunity cost for Scotland to produce one motorcycle is
15 ÷ 5 = 3
Therefore, Scotland can produce 3 motorcycles. This gives the advantage to Ireland as they can
produce 1.5 more motorcycles than Scotland.
ECO10004: Economic Principles Assignment 1A
Price ($)
Quantity demanded
Quantity supplied
4
1000
400
8
800
400
12
600
400
16
400
400
20
200
400
Table 1-2: Quantity demanded and supplied for the ‘The Theatre Company’
Question 3. Draw the demand and supply curves for the ‘The Theatre Company’. What are the
equilibrium price and quantity of entry tickets? Explain why this is the equilibrium point. (1 mark)
1000
1200
Supply and Demand Chart
