EconSim

Comparative Advantage & Gains from Trade

Discover why two producers both end up better off by specializing in what they give up the least to make.

Discover why two parties both gain from specializing by comparative — not absolute — advantage.

  • Opportunity cost
  • Specialization
  • Production possibility frontier
  • Comparative vs. absolute advantage
  • Gains from trade

Guided walkthrough

Step 1 of 3
Predict first

Compare each producer's 'cost of 1 Good A'. Who gives up less Good B?

Before you act, predict what will happen. That producer has the comparative advantage in A — does it match who is better in absolute terms? Then do it — did your prediction match what happened?

Production possibilities

Each producer's PPF, plus the combined frontier once they specialize and trade. No-trade output sits inside the combined frontier; specialization reaches it.

Producer 1 — cost of 1 Good A1 B
Producer 2 — cost of 1 Good A3 B