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Suppose Alpha and Omega are the only two countries in the world. Alpha produces 250 units of peanuts if it puts all its resources
Suppose Alpha and Omega are the only two countries in the world. Alpha produces 250 units of peanuts if it puts all its resources in making peanuts. Alpha produces 150 units of popcorn if it puts all its resources in making popcorn. Omega produces 100 units of peanuts if it puts all its resources in making peanuts. Omega produces 300 units of popcorn if it puts all its resources in making popcorn. Peanut is measured on the horizontal axis and popcorn is measured on the vertical axis. If each country decides to trade; then they trade 100 units of popcorn for 100 units of peanuts. (Remember: the country that has comparative advantage in a product will export it & the country that does not have comparative advantage in that product will import it) After trade Alpha consumes peanuts and popcorns 150, 100 125,75 O 100, 225 O 75,25
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