Question

Bob Stella Change Light Bulb (time) 10 minutes 3 minutes Fix Fuses (time) 2 minutes 30 seconds
find absolute and comparative advantage please! with steps

Answer 1

Absolute advantage is defined as a situation where an individual or an economy can produce a good or a service using lower resources compared to others.

In this example Stella has absolute advantage in change of light bulb as well as fix fuses because Stella is using less time resource compared to Bob. Stella takes just 3 minutes to change bulb whereas Bob takes 10 minutes to change bulb. In fixing fuses Stella takes 30 seconds whereas Bob takes 2 minutes. Hence we can say Stella has absolute advantage in changing light bulbs as well as fixing fuses.

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Comparative advantage is defined as a situation where an individual or an economy can produce a good or a service at a lower opportunity cost than others.

The opportunity cost for Bob to change 1 bulb is 5 fix fuses given up because it takes 10 minutes to change one bulb for Bob and the same 10 minutes can also be used to fix 5 fuses.

The opportunity cost for Bob to fix fuses is 0.2 bulbs given up because it takes 2 minutes for Bob to fix fuse and the same 2 minutes can also be used by Bob to complete (2$\div$10) i.e. 20% of changing light bulb job.

The opportunity cost for Stella to change one light bulb is six fuses given up because it takes 3 minutes to change light bulb and the same 3 minutes can also be used to fix 6 fuses ( 180 seconds (3 mins) $\div$ 30 seconds = 6 fuses)

The opportunity cost for Stella to fix one fuse is 17% of changing light bulb job given up because it takes 30 seconds to fix one fuse and the same 30 seconds can be used to complete 17% of change light job.  ( 30 seconds $\div$ 180 seconds = 0.1677)

The results are summarized in the table below:-

	Change light bulb	Fix fuses	Opportunity cost to change bulb	Opportunity cost to fix fuses
Bob	10 minutes	2 minutes	5 fuse given up	0.2 bulb given up
Stella	3 minutes	30 seconds	6 fuses given up	0.17 bulb given up

Hence Bob has comparative advantage in change of light bulb because his opportunity cost of changing light bulb is less than Stella's.

Stella has comparative advantage to fix fuses because her opportunity cost of fix fuses is less than that of Bob's.