Bouncy now requires less
labour than Big to produce both
food and cloth. If there is no
trade it can produce the 12 tons
of food it needs and 24 bales of
cloth (12, 24). Big would produce
12 tons of food, but only 6 bales
of cloth (12, 6). However, if
the countries specialize in the
product in which they are comparatively
more efficient, their
production increases. Big is now
relatively more efficient at food
production, because it uses only
twice as much labour as cloth,
whereas Bouncy uses three times
as much labour to produce food.
So Big specializes in food, producing
15 tons, consuming 12
and exporting 3. With imports of
3 tons of food, Bouncy now cuts
food production to 9 tons, requiring
27 units of labour. With the
remaining 33 units of labour it
produces 33 bales of cloth, nine
more than previously. It exports
6 bales to Big in return for the
3 tons of food and is left with 3
more bales of cloth than it hadwithout trade, so trade has increased output by 3 bales of cloth. The question is how
much of this does Big get?