International Trade Lab
International Trade — Comparative Advantage
International trade theory explains why nations benefit from trading even when one country is more efficient at producing every good — the principle of comparative advantage. This simulator lets you define production possibility frontiers for two countries, find their comparative advantages, and see how trade expands both countries' consumption beyond their domestic frontiers. Tariffs and quotas can then be added to show welfare costs.
What you can do in this simulation
- Set labor productivity for two goods in two countries to reveal comparative advantage
- Draw each country's production possibility frontier and autarky equilibrium
- Allow trade at a world price and see specialization and consumption gains
- Impose a tariff or import quota and measure the resulting deadweight loss and redistribution
- Compare free-trade and restricted-trade welfare for producers and consumers separately
Concepts covered
comparative advantage · production possibility frontier · terms of trade · tariff · specialization · gains from trade
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