Page 22 - FINAL CFA I SLIDES JUNE 2019 DAY 6
P. 22
Session Unit 5:
19. Int. Trade & capital Flows, p136
LOS 19.c: Distinguish between comparative advantage and absolute advantage, p.139
Let P shift 8 worker-days form cloth to wine and England -10 worker-days from wine to cloth:
Specialisation improved productivity and
overall welfare for both countries!
-8 * = -800 +8 * = +880
+10 * = +900 -10 * = -800
Gain from Trade = +100 +80
This assumes constant opportunity cost, but 100 Food
we know as you specialise in say food,
opportunity cost grows as less and less land is
then available to say machine goods:
0 Machines
0 Food 30 Machines
