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> Wouldn't the world be flush with Portugal's product in both industries rather than only in wine? In short, yes. But that's merely an extreme case, not an cou
by nandemo 10y ago
> Wouldn't the world be flush with Portugal's product in both industries rather than only in wine?
In short, yes. But that's merely an extreme case, not an counterexample to the principle.
Starting with the no-trade situation, Portugal producing 1M units of cloth and 1M units of wine, England producing only 10 units each. Note that "the world" is already flush with Portuguese products.
If they start trading and want to keep the same total production of cloth, then England would produce only cloth (20 and odd units), and Portugal would produce a little less cloth (1M - England's production) and bit more wine.
- SapphireSun 10y agoI see I think there's a deeper subtlety I'm not quite grasping. When you provide a fixed production level for a given resource, it makes a lot more sense, but what forces there to be a fixed level of cloth but a floating level for wine? At first I was thinking that there will be a certain demand level for a good, and the supply will shift to meet it fixing a price for the good. However, who's to say that just because there's more (potential) supply more wine will necessarily be produced? Couldn't those remaining people just be unemployed?
- lambertsimnel 10y agoI realise I don't understand it as well as I thought I did. How about variable outputs of any commodity and countries taking any opportunity they can to increase consumption by replacing domestic production of a commodity with foreign production bought with the proceeds of extra production of another commodity for export. No country would benefit from producing so much that it put all foreign industry out of business; nobody exports anything except in exchange for something (imports).