Page 26 - FINAL CFA SLIDES DECEMBER 2018 DAY 6

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