The Ricardian Approach: Comparative Advantage
Example:
Two Countries: England
Portugal
Two Goods: Cloth
Wine
Hours of Labor Required to Produce One Unit
|
Country |
Wine |
Cloth |
|
England |
2 |
2 |
|
Portugal |
4 |
8 |
The opportunity cost in
hours to produce one more yard of cloth or one more bottle of wine is lower in
England than in Portugal, but the opportunity of more cloth is relatively lower
in England. In England the trade-off in production is one for one, In Portugal,
it is two wine for one cloth.