Comparative Advantage Lab: Compare Output and Trade
Explore comparative advantage with two producers. Change daily output and terms of trade; compare opportunity costs, production frontiers, and specialization.
Free, with no sign-up.
For High school students and adults reviewing the topic.
About 10 minutes.
How does it work?
- Set each producer’s output per worker-day for bowls and lamps.
- Compare equal time splitting with specialization by opportunity cost.
- Choose a trade rate in lamps per bowl, then check the challenges.
What will you get?
Use opportunity costs to identify specialization and a trade-rate interval that benefits both sides.
What does the model assume?
- Each illustrative producer has 10 worker-days. Labor divides continuously between bowls and lamps, with constant output per worker-day.
- There are no transport costs, tariffs, quality differences, unemployment, or other goods in this model.
- Without specialization, each producer spends half its worker-days on each good. With distinct comparative advantages, each devotes all its time to the good with lower opportunity cost.
- Complete specialization need not raise both output totals compared with the equal split. The composition changes; partial reallocation and trade determine the consumption bundles.
- At equal opportunity costs, neither producer has a strict comparative advantage. The comparison keeps the equal split and has no open trade-rate interval.
- Terms of trade are lamps paid for one bowl. Both sides gain per exchanged bowl only strictly between their opportunity costs; at a boundary one side is indifferent.
- The trade check concerns the per-unit rate, not a negotiated quantity or a full consumption allocation. Fractional outputs are allowed.
Which setup would you like to try?
What can you change?
Range: 1 to 20 bowls/day.
Range: 1 to 20 lamps/day.
Range: 1 to 20 bowls/day.
Range: 1 to 20 lamps/day.
Range: 0.1 to 20 lamps/bowl.
What does the model predict?
| Quantity | Value | Unit |
|---|---|---|
| A: cost of a bowl | 0.5000 | lamps/bowl |
| A: cost of a lamp | 2.0000 | bowls/lamp |
| B: cost of a bowl | 1.0000 | lamps/bowl |
| B: cost of a lamp | 1.0000 | bowls/lamp |
| Lower bowl opportunity cost | Producer A | |
| Lower lamp opportunity cost | Producer B | |
| Combined bowls without specialization | 90.0000 | bowls |
| Combined lamps without specialization | 60.0000 | lamps |
| Combined bowls with specialization | 120.0000 | bowls |
| Combined lamps with specialization | 60.0000 | lamps |
| Lower trade-rate boundary, excluded | 0.5000 | lamps/bowl |
| Upper trade-rate boundary, excluded | 1.0000 | lamps/bowl |
| Selected rate benefits both per unit | Yes | |
| Specialization comparison | Each producer makes its lower-cost good |
- Producer A: solid line
- Producer B: dashed line
Can you reach these targets?
Set A to 10 bowls or 5 lamps per day and B to 4 bowls or 4 lamps. Choose a rate in lamps per bowl that gives both a strict gain.
- Target: Producer A: bowls per worker-day = 10 bowls/day; tolerance 0 bowls/day.
- Target: Producer A: lamps per worker-day = 5 lamps/day; tolerance 0 lamps/day.
- Target: Producer B: bowls per worker-day = 4 bowls/day; tolerance 0 bowls/day.
- Target: Producer B: lamps per worker-day = 4 lamps/day; tolerance 0 lamps/day.
- Selected rate benefits both per unit (Yes)
Set A to 10 bowls or 5 lamps per day and B to 8 bowls or 2 lamps. Identify the lower-cost bowl producer and choose a mutually beneficial rate.
- Target: Producer A: bowls per worker-day = 10 bowls/day; tolerance 0 bowls/day.
- Target: Producer A: lamps per worker-day = 5 lamps/day; tolerance 0 lamps/day.
- Target: Producer B: bowls per worker-day = 8 bowls/day; tolerance 0 bowls/day.
- Target: Producer B: lamps per worker-day = 2 lamps/day; tolerance 0 lamps/day.
- Lower bowl opportunity cost (Producer B)
- Selected rate benefits both per unit (Yes)