Examination of the ricardian model of comparative advantage

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An examination of Ricardian model of comparative advantage yields clear result that trade is (potentially) profitable for each of two trading partners since it permits for an expanded consumption choice for each. However, for the world as a whole the expansion of production of one product must involve a decrease in the availability of the other, so that it is not clear that trade is better for the world as a whole as compared to an initial situation of non-trade (but efficient production in each country). Are there in fact gains from trade for the world as a whole? Describe.

Reference no: EM1375370

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