In this section, we use a numerical example to solidify our understanding of two crucial points:
When two countries specialize in producing the goods in which they have a comparative advantage, both countries gain from trade.
Comparative advantage must not be confused with absolute advantage; it is comparative, not absolute, advantage that determines who will and should produce a good.
Suppose, then, that home and foreign have the unit labor requirements illustrated in table 2-2.
A striking feature of this table is that home has lower unit labor requirements, that is, has higher labor productivity, in both industries. Let us leave this observation for a moment, however, and focus on the pattern of trade.