Case Study: One Motorcycle One Guitar

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One motorcycle One Guitar Ireland 15 hours 2.5 hours Scotland 9 hours 2 hours 1. According to table above, Scotland commits 9 hours of labor to produce one unit of motorcycle, which are fewer than Ireland’s hours of work necessary to produce one unit of motorcycle. Scotland is able to produce one unit of motorcycle with fewer hours of labor; therefore Scotland has an absolute advantage in the production of motorcycle. On the other hand, Scotland commits 2 hours of labor to produce one unit of Guitar, which are fewer than Ireland’s hours of work necessary to produce one unit of Guitar. Scotland is able to produce one unit of motorcycle Guitar with fewer hours of labor; therefore Scotland has an absolute advantage in the production of Guitar. …show more content…

Scotland has an absolute advantage over production of both motorcycle and guitar also. Here, if Scotland commits all of its labor (9+2) for production of motorcycle for which Scotland has an absolute advantage. Scotland produces (9+2) ÷ 9= 1.22 units of motorcycle. If Scotland commits all its labor (9+2) for guitar, Scotland produces (9+2) ÷ 2= 5.5 units of guitar. Whereas, if Ireland commits all its labor (15+2.5) for production of motorcycle, Ireland produces (15+2.5) ÷ 15= 1.16 units of motorcycle. If Ireland commits all its labor (15+2.5) for production of guitar, Ireland produces (15+2.5) ÷ 2.5= 7 units of …show more content…

According to law of economics, when commodity price is increases by 10%, then demand of commodity is also decreases by 10%, supply is automatically decreases by 10%, when supply of commodity is decreases then in the market, value of iron ore workers who works for mining of iron also decreases because manufacturing of that commodity also effected, which will create unemployment for that worker. On the contrary, when commodity price is decreases by 10% then demand of commodity is also increases by 10%, supply is automatically increases by 10%, when supply is increases then in the market, value of iron ore workers who works for mining of iron increases, which will create progress for that

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