For Students · Comparative Advantage
Comparative Advantage for a demand shock
Built for students learning it for a class or exam. See the concept move instead of memorizing formulas — and check your homework intuition. Simulate a demand shock live below — adjust the inputs and watch it respond, right in your browser.
Comparative AdvantageLive
the gains from trade
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David Ricardo's great insight: even if one country is worse at making everything, both still gain from trade. Each should specialize in the good it gives up the least to produce — its comparative advantage — measured by the slope of its production-possibility frontier. Trade then lets both consume beyond their own frontiers.
Data Inspector
A opp. cost (wine)0.50 cloth
B opp. cost (wine)2.00 cloth
A should makewine
B should makecloth
Governing equation
Reading this result: Country A gives up 0.50 cloth per wine versus B at 2.00, so A specializes in wine and B in cloth — trade then lets both consume beyond their own frontiers.
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