Interactive simulator
Gains from Trade Simulator
When each country specializes according to comparative advantage, both can consume beyond their own production possibilities. This simulator shows two production possibility frontiers and the terms of trade between them: pick a trade price inside the opportunity-cost range and watch both countries' consumption bundles expand past autarky. In this release this page is powered by the closest available interactive widget; a dedicated widget for this topic is planned.
Equilibrium solves Qd = Qs, so P* = (a − c) ÷ (b + d). Shifting demand changes a; shifting supply changes c. A ceiling only bites when set below P* (creating a shortage); a floor only bites when set above P* (creating a surplus).
How to use it
Note each country's opportunity costs.
Choose a terms-of-trade price between the two opportunity costs.
Watch both consumption bundles move beyond the autarky frontiers.
What you will learn
- Explain comparative advantage.
- Show how trade expands consumption possibilities.
- State why the terms of trade must lie between opportunity costs.
Model notes
Two goods, two countries, no transport costs or tariffs, full employment — the classic Ricardian simplifications. Distributional effects within countries are not shown.