Le Mans: Prototype Class
Page 1 of 2  1  2 

LinkBack  Thread Tools 
grrrr need help with homework!
I realize many of you are well out of school, but not me! anyway, I need some help in Microeconomics if anyone knows a bit about that. We're talking about the Production Possibilities Frontier and terms of trade etc. Anyway, I have a problem that's stumping me here if anyone could chime in and help me out and see if i've done something wrong here.
Problem
Assume we have only two countries in the world: Spain and Romania. Both countries can produce 2 goods: shoes and clothes. There are different population in these two countries. Spain has 20 workers, and Romania has 30 workers. The technology, measured by how much units of a good can be produced by one worker is given as a table.
Spain: 12 units of shoes per worker8 units of clothes per worker
Romania: 5 units of shoes per worker  20 units of clothes per worker.

I've figured out that obviously Romania has a comparative advantage over Spain in producing clothes and Spain over Romania in producing shoes.
The question that's getting me here is "What should the term of trade be in order to make both countries better off from trade?" Term of trade is expressed by the units of clothes per unit of shoes.
I get what the question is asking but can anyone help me with the info they provided?
Problem
Assume we have only two countries in the world: Spain and Romania. Both countries can produce 2 goods: shoes and clothes. There are different population in these two countries. Spain has 20 workers, and Romania has 30 workers. The technology, measured by how much units of a good can be produced by one worker is given as a table.
Spain: 12 units of shoes per worker8 units of clothes per worker
Romania: 5 units of shoes per worker  20 units of clothes per worker.

I've figured out that obviously Romania has a comparative advantage over Spain in producing clothes and Spain over Romania in producing shoes.
The question that's getting me here is "What should the term of trade be in order to make both countries better off from trade?" Term of trade is expressed by the units of clothes per unit of shoes.
I get what the question is asking but can anyone help me with the info they provided?
2004 Subaru Impreza WRX STi
Sponsored Links  
Advertisement 

Re: grrrr need help with homework!
wait, think i got it, was anyone else thinking 5:2?
2004 Subaru Impreza WRX STi
Re: grrrr need help with homework!
12:7 ?
2006 Whitewater Pearl Mazda 3 S GT Hatch: Garage Vary Valiant Lip, Grill and Eyelids : Custom JL/Alpine Audio : MazdaSpeed Accessory Springs and Swaybars : JDM MazdaSpeed Strut Bar : Koni Yellows : 5Zigen Pro Racer zr520 : Continental ExtremeContact DW : Buddy Club Condenser : XE Pedals : Black Rays Lugs : HP Tint : Stubby :
My car thread
To view links or images in signatures your post count must be 0 or greater. You currently have 0 posts.
Le Mans: Prototype Class
Join Date: Oct 2008
Posts: 1,437
Re: grrrr need help with homework!
I've never taken Microeconomics before, and I have no idea what's the correct answer, but based on what I think, this is probably how the problem is solved:
Spain produces 12 shoes and 8 clothes per worker. 20 workers in Spain produces a total of 240 shoes and 160 clothes.
Romania produces 5 shoes and 20 clothes per worker. 30 workers in Romania produces a total of 150 shoes and 600 clothes.
The average amount of items produced by both countries are 195 shoes and 380 clothes.
Spain produces more, so it would need to give 45 (240 minus 195) to Romania to have equal amount for each country.
Similarly, Romania would need to give 220 (600 minus 380).
The ratio becomes every 45 shoes from Spain for every 220 clothes from Romania = 45:220 = 9:44.
P.S. you know u spend too much time on the forums when u ask for homework help here
Spain produces 12 shoes and 8 clothes per worker. 20 workers in Spain produces a total of 240 shoes and 160 clothes.
Romania produces 5 shoes and 20 clothes per worker. 30 workers in Romania produces a total of 150 shoes and 600 clothes.
The average amount of items produced by both countries are 195 shoes and 380 clothes.
Spain produces more, so it would need to give 45 (240 minus 195) to Romania to have equal amount for each country.
Similarly, Romania would need to give 220 (600 minus 380).
The ratio becomes every 45 shoes from Spain for every 220 clothes from Romania = 45:220 = 9:44.
P.S. you know u spend too much time on the forums when u ask for homework help here
Re: grrrr need help with homework!
i also go 9:44, using a different method, but not sure if its right. been a long time since econ lol
let x = shoes and y = clothes.
(20)(12x + 8y)=(30)(5x + 20y)
work it out from there.
let x = shoes and y = clothes.
(20)(12x + 8y)=(30)(5x + 20y)
work it out from there.
[center]
WARNING: This post may contain sarcasm, jokes and/or straight up douchebaggery
To view links or images in signatures your post count must be 0 or greater. You currently have 0 posts.
Re: grrrr need help with homework!
yes but i think i forgot to mention, both countries then produce 1 depending who has absolute advantage. So therefor, Spain will produce shoes solely, and Romania will then produce clothing. So spain can produce 240 shoes and Romania can produce 600 clothes, that's using all their workers to produce the 1 item they have advantage of. So 600:240 = 5:2
2004 Subaru Impreza WRX STi
F1 Driver
Join Date: Jul 2006
Location: Allentown Pa
Posts: 7,643
Re: grrrr need help with homework!
aint that a polynomial or something?
algebra
algebra
Rally White 2005 Mazda3 S  Lentech street terminator, Trubendz, AWR, VTCS, Apexcone 5000k lows, Alpine HD137BT stereo, Alpine FRP and MRP 450 amps, 5 farad cap, 12" Typer @ 2Ω, Infinity Kappas 5x7.
Super Black 2004 Murano SL  Luxury Package bone stock
Le Mans: Prototype Class
Join Date: Oct 2008
Posts: 1,437
Re: grrrr need help with homework!
polynomials go like x^2 + 2x + 3 lol. everything I said, DamnLocust just said it in the form of an equation.. same exact thing.. it would turn out to 90x=440y = 9x=44y = 9shoes=44clothes
strobe media, but then the numbers spain producing 8 clothes per worker and romania producing 5 shoes per worker becomes irrelevant. one might think, maybe those numbers are there just to throw u off, and simulating realistic problems. but what if u think of it like, instead of workers producing those 8 clothes each, use the resources to produce shoes instead (from spain).. and make clothes instead of 5 shoes (from romania) ??
edit:
then u need to use shoes:clothes ratio for each country...
for spain.. 12:8 = x:160 ... x = 240 ... so spain would produce additional 240 shoes
for romania.. 5:20 = 150:y ... y = 600 ... and romania additional 600 clothes
(240+240)600+600) = 2:5 ... lol i just did more work for no reason.. FAIL!
strobe media, but then the numbers spain producing 8 clothes per worker and romania producing 5 shoes per worker becomes irrelevant. one might think, maybe those numbers are there just to throw u off, and simulating realistic problems. but what if u think of it like, instead of workers producing those 8 clothes each, use the resources to produce shoes instead (from spain).. and make clothes instead of 5 shoes (from romania) ??
edit:
then u need to use shoes:clothes ratio for each country...
for spain.. 12:8 = x:160 ... x = 240 ... so spain would produce additional 240 shoes
for romania.. 5:20 = 150:y ... y = 600 ... and romania additional 600 clothes
(240+240)600+600) = 2:5 ... lol i just did more work for no reason.. FAIL!
F1 Driver
Join Date: Jul 2009
Location: St. Louis
Posts: 2,504
Re: grrrr need help with homework!
gf (economics and math double major) just confirmed 5:2 was correct
To view links or images in signatures your post count must be 0 or greater. You currently have 0 posts.
Re: grrrr need help with homework!
well it wouldn't be addition because they would have absolute advantage over the other country, so they would stop production of the lesser product and raise production of their greater.
TRex thanks for asking the gf, i appreciate the confirmation!
TRex thanks for asking the gf, i appreciate the confirmation!
2004 Subaru Impreza WRX STi
Sponsored Links  
Advertisement 



Thread Tools  
Show Printable Version Show Printable Version
Email this Page Email this Page


Posting Rules  