Q.India requires 4 labour hours to produce 1 unit of Cloth and 2 labour hours to produce 1 unit of Wheat. Country B requires 6 labour hours for 1 unit of Cloth and 5 labour hours for 1 unit of Wheat.

Absolute advantage looks only at who needs fewer hours outright; comparative advantage looks at the opportunity cost ratio — and the two can point to opposite conclusions.

(a) Absolute advantage — compare labour hours directly:

• Cloth: India needs 4 hours, Country B needs 6 hours → India is more efficient (fewer hours) → India has the absolute advantage in Cloth.
• Wheat: India needs 2 hours, Country B needs 5 hours → India is more efficient → India has the absolute advantage in Wheat too. So India has an absolute advantage in BOTH goods.

(b) Comparative advantage — compare opportunity costs (the ratio of hours needed for one good to hours needed for the other):

• Opportunity cost of Cloth (in Wheat) = hours(Cloth) ÷ hours(Wheat):
  • India = 4 ÷ 2 = 2.0 units of Wheat per unit of Cloth
  • Country B = 6 ÷ 5 = 1.2 units of Wheat per unit of Cloth
  • Country B's cost (1.2) is LOWER than India's (2.0) → Country B has the comparative advantage in Cloth.
• Opportunity cost of Wheat (in Cloth) = hours(Wheat) ÷ hours(Cloth):
  • India = 2 ÷ 4 = 0.5 units of Cloth per unit of Wheat
  • Country B = 5 ÷ 6 ≈ 0.83 units of Cloth per unit of Wheat
  • India's cost (0.5) is LOWER than Country B's (0.83) → India has the comparative advantage in Wheat.

Verification (dual-solve, independent check): the two opportunity costs of Cloth and Wheat within each country must be reciprocals of each other (since they measure the same trade-off from opposite directions). India: 2.0 and 0.5 → 1 ÷ 2.0 = 0.5 ✓. Country B: 1.2 and 0.83 → 1 ÷ 1.2 = 0.833 ✓. Both check out, confirming the ratios above are computed correctly.

Compute absolute advantage by directly comparing labour-hour requirements per unit. Compute comparative advantage by taking the ratio of hours for one good to hours for the other good within each country, and identifying which country has the LOWER opportunity cost for each good.

Concluding 'no basis for trade' simply because one country (India) has the absolute advantage in everything — this is exactly the case Ricardo's comparative-advantage theory was designed to address; absolute advantage in both goods does not rule out mutually beneficial trade based on comparative advantage.