Jeff's production increases with trade     Without specialization and trade, point AJeff-No Trade is available to Jeff, where he produces 30 web pages and 15 graphic images each week.

    Suppose Jeff specializes in web page production and Jenn specializes in graphic image production, with Jeff producing 60 web pages and Jenn producing 50 images each week. If they choose to trade at a ratio of 5 images for 6 pages, Jeff could trade to point AJeff-Trade. This would allow him to have as many pages as before, but 10 additional images each week for the same effort. Jenn also ends up with 25 images and 30 pages, an output well above her PPF. This is simply one possible outcome of trade. They could end up at other points along the STOR depending on how much they trade, and as we will see in the section on terms of trade, there are many other possibilities not along that line.

Copyright © 1995-2004 OnLineTexts.com, Inc. - All Rights Reserved