A one-factor economy
To introduce the role of comparative advantage in determining the pattern of international trade, we begin by imagining that we are dealing with an economy – which we call home – that has only one factor of production. We imagine that only two goods, wine and cheese, are produced. The technology of home’s economy can be summarized by labor productivity in each industry, expressed in term of the unit labor requirement, the number of hours of labor required to produce a pound of cheese or a gallon of wine. For example, it might require 1 hour of labor to produce a pound of cheese, 2 hours to produce a gallon of wine. For future reference, we define a_LW and a_LC as the until labor requirements in wine and cheese production, respectively. The economy’s total resources are defined ass L, the total labor supply.