Exam (elaborations) ECS3702 - International Trade (ECS3702) NOV 2021 EXAM MEMO

ECS3702

OCT/NOV 2021 EXAM MEMO
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, Question 1

Kenya Lesotho
Tea [ton/hr] 8 2
Wool [ton/hr] 6 4



(i) Identify the commodity in which Kenya and Lesotho have an absolute advantage and
absolute disadvantage. Explain your answer. [4 marks]

(a)

Absolute advantage exists when one country is more efficient than another in the production
of one commodity and absolute disadvantage exists when that same country is less efficient
in the production of a second commodity than the other nation.

In the given scenario, Kenya has an absolute advantage in the production of both goods as it
can produce more of both better than Lesotho. Kenya has 8 ton/hr of tea and 6 ton/hr of wool
compared to the 2 ton/hr of tea and 4 ton/hr of wool for Lesotho. Lesotho has an absolute
disadvantage in the production of both goods.

(ii) Indicate the commodity of each nation’s comparative advantage and disadvantage. No
marks will be awarded if you do not show your workings. [6 marks]

Kenya Lesotho
Tea [ton/hr] �
8 [ � = �. ��]
�
2 [ � = �]

Wool [ton/hr] �
6 [ � = �, ��]
�
4 [ � = �. �]