Comparative Advantage

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Comparative advantage is best described through the production possibility curve. Row % of resources devoted to production of guns Number of guns % of resources devoted to production of bread Pounds of bread A 0 0 100 15 B 20 4 80 14 C 40 7 60 12 D 60 9 40 9 E 80 11 20 5 F 100 12 0 0 (a). Production Possibility Table (b) Production Possibility Curve Bread Guns The production table contains information on the trade-off between the production of guns and bread. The information is plotted on the graph (b). As we move along the …

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…specialize in their strengths and they manage to get four problems of algebra and four problems of statistics solved in one day. When individuals trade, using their comparative advantage their combined production possibility curve shifts out. (Colander) The above example gives a visual sense of the power of markets to make people better off. Markets allow people to trade, to utilize their comparative advantage and there by to improve society’s combined production possibility curve.