1. ABSOLUTE ADVANTAGE MODEL ASSUMPTIONS 2 COUNTRIES A, B 2 PRODUCTS X, Y 1 FACTOR OF PRODUCTION LABOUR COST MEASURED AS LABOUR COST PRODUCTIVITY ABSOLUTE ADVANTAGE

2. COST IN LABOUR UNITS 10L IN A FOR IX 20L IN A FOR 1Y 20L IN B FOR 1X 10L IN B FOR 1Y A HAS AA IN X B HAS AA IN Y

3. AA COINCIDENCE OF EFFIC. WITHOUT TRADE PRODUCTION OF 1Y IN COUNTRY A COSTS 2X IN B WITHOUT TRADE 1Y COSTS 0.5X SUPPOSE TRADE TAKES PLACE AT EXCHANGE OF 1X=1Y ARE THERE GAINS?

4. AA A GETS 1Y FOR 1X 10L….1X………1Y…. NOT 0.5Y 10L…1Y INSTEAD OF 20L GAINS IN COUNTRY A GAINS IN B ALSO 1Y FOR 1X IN TRADE INSTEAD OF 1Y (10L) GETTING 0.5X

5. AA MORE GOODS FOR BOTH SIMPLE BASIC EXPLANATION OF GAINS BUT STRONG EXPLAINS MUCH TRADE IMPLICATION THAT EACH COUNTRY MUST BE EFFIC IN THE PRODUCTION OF SOMETHING ASSUMPTIONS/REQUIREMENTS

6. AA SPECIALISATION IN PRODUCTION LABOUR FLOWS MOBILITY OF LABOUR TYPES OF PRODUCTS EXCHANGE RATES TRADE BASED ON EXISTING AAs BASIC ARGUMENT F/T………GAINS

7. AA DELAY TRADE UNTIL DIFFERENT AA OR UNTIL DIFFERENT EXCHANGE RATE AGRICULTURAL PRODUCE Vs PROCESSED FOOD RICH COUNTRIES AND LDCs PACE OF INTROD OF F/T

8. COMPARATIVE ADVANTAGE RICARDO WHAT IF ONE COUNTRY IS MORE EFFIC. IN PRODUCTION OF EVERYTHING ? TRADE BETTER THAN SELF SUFFIC POWERFUL ARGUMENT FOR TRADE MODEL IS 2.2.1

9. CA LABOUR USED TO MEASURE COST OF PRODUCTION ENGLAND AND PORTUGAL WINE AND CLOTH P MORE EFFIC IN BOTH P HAS AA IN BOTH MEASURED IN LABOUR INPUTS

10. CA P 80L FOR 1W 90L FOR 1C E 120L FOR 1W 100L FOR 1C GAP IN EFFIC IS NOT THE SAME ENGLAND CLOSER TO PORTUGAL IN CLOTH OPPORTUNITY COST OC OF X IS THE AMOUNT OF Y GIVEN UP TO PRODUCE 1X

11. CA OC OF PRODUCTION WINE OC P 80L TO PRODUCE 1W 90L FOR 1C OC OF 1W IN P IS 80 DIVIDED BY 90 OR O.89 OC OF 1W IN ENGLAND IS120 DIVIDED BY 100 OR 1.2

12. CA OC OF IC IN PORT. IS 1.13 OC OF 1C IN ENG. IS 0.83 1W USES LABOUR WHICH COULD BE USED FOR CLOTH HOW MUCH CLOTH ? CA IS WHERE OC IS LOWER AT HOME THAN IN OTHER COUNTRIES

13. CA IF GAINS ARISE IT IS A POWERFUL BASIS FOR TRADE ASSUME NO INTER TRADE PRICES AND EXCHANGE VALUES DEPEND ON COSTS OF PRODUCTION IN ENG 1W COSTS 1.2C IN PORT 1W COSTS 0,89C

14. CA TRADE IF ENG GETS 1W FOR LESS THAN 1.2C GAIN… IF PORT GETS MORE THAN 0.89C FOR 1W GAIN…. ASSUME EXCHANGE RATE IS 1W= IC BOTH ENG AND PORT GAIN

15. CA IDENTIFY AN EX RATE AT WHICH ENG GAINS BUT PORT DOES NOT NO TRADE UNLESS BOTH GAIN DISTRIBUTION OF GAINS IDENTIFY AN EX RATE WHERE BOTH GAIN BUT NOT 1 FOR 1 WHO IS BETTER OFF RELATIVE TO THE 1 FOR 1

16. CA ISSUES BASED ON FIGURES GAIN FOR BOTH WHY MIGHT TRADE NOT BE DESIRABLE ? HOW WOULD COMPARATIVE ADVANTAGE WORK IN REAL WORLD TRADE WHAT IS MECHANISM ?