Scenario: Brenda and Lela are sisters. They both like to make ice cream and cake

Question

Scenario:

Brenda and Lela are sisters. They both like to make ice cream and cake. Brenda makes one batch of ice cream in eight hours and bakes a cake in two hours. Lela makes one batch of ice cream in 10 hours and bakes a cake in 5 hours.

Reference the scenario above to answer these questions:

Who has the absolute advantage in making ice cream? Explain how you determined this.

Who has the comparative advantage in making ice cream? Explain how you determined this.

Compare the absolute advantage of making cake to the comparative advantage of making cake for the two sisters.

Explanation / Answer

Brenda has absolute advantage in making ice cream, as she takes only 8 hrs. one who takes less time has absolute advantage

Brenda has to give up 4 cakes (8/2) to prepare 1 batch of ice cream, whereas lela has to give up only 2 cakes ( 10/5) to prepare 1 batch of ice cream. So lela has comparative advantage in making ice cream

Brenda has absolute advantage in making a cake as she takes only 2 hrs.

Brenda has to give up 1/4 th batch of ice cream (2/8) to prepare a cake, whereas lela has to give up 1/2 batch of ice cream (5/10) to prepare a cake. So Brenda has comparative advantage of making a cake

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