Cambridge International as and a level Economics Ebook

SELF-ASSESSMENT TASK 
4.9
Peru has a strong fi shing industry and has a 
comparative advantage in producing fi shmeal, which 
is used in food for chickens. Th
e country has fertile 
fi shing grounds along its coasts, which benefi t from 
two currents, the Humboldt current and El Nino. 
Some of the fi sh caught is used as a raw material in 
the production of fi shmeal.
Peru has a long tradition in producing fi shmeal, 
with its workers well-skilled in the production 
process. Th
e country is a major producer and 
exporter of the product. Th
e industry’s future 
prospects and its comparative advantage may be 
infl uenced by climate changes and changes in the 
country’s labour costs relative to those in other 
fi shmeal producing countries.
1
Explain 
one
reason why Peru has a comparative 
advantage in producing fi shmeal.
2
Explain the diff erence between a comparative 
advantage in producing a product and a 
competitive advantage in producing that product.
Before 
specialisation
Aft er 
specialisation
Coats
Shirts
Coats
Shirts
USA
4,000
10,000
8,000
Bangladesh
1,000
8,000
16,000
Total
5,000
18,000
8,000
16,000
Table 4.6 
Comparative advantage: the benefits of 
specialisation
Figure 4.21 
Comparative advantage
No. of shirts
USA
Bangladesh
4,000
8,000
10,000
1,000
No. of coats
103

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Cambridge International AS Level Economics
TOP TIP
If you are going to include a numerical example to 
illustrate comparative advantage, keep the example brief 
and the figures straightforward – e.g., 5,000 rather than 
5,136 – and make sure they accurately show comparative 
advantage. Also do not just rely on an example, but 
provide a lucid written explanation as well.