Trade and Technology: The Ricardian Model - Faculty

Autarky: PPF
International Commercial Policy
The Ricardian Model
The production possibility frontier (PPF) of an economy
represents the maximum amount of goods that can be
produced for a fixed amount of resources.
If Q C represents the quantity of cheese produced and Q W
represents the quantity of wine produced, then the
production possibility frontier of the domestic economy has
the equation:
16
Labor required for
each unit of
cheese production
a LCQ C
+
a LWQ W
=
L
Total units
of cheese
production
Labor required for
each unit of wine
production
Total amount of
labor resources
Total units
of wine
production