America without Trade
Chapter 1 introduced the PPF, which shows the combinations of commodities that can be produced with a society’s given resources and technology. Using the production data shown in Table 15-2,and assuming that both Europe and America have 600 units of labor, we can easily derive each region’s PPF. The table that accompanies Figure 1 the 01 food and clothing that America can produce with inputs and technology, plot the production the blue, line shows America’s PPF The F has a slope this represents the terms on which food and I can he production, In with no trade. the I food to clothing will also he one-hall. So concentrated on production and ignored consumption that if America is isolated from all it call it produce-, Say for the income and production and consumption the absence or trade, trade. America produces and consumes 400 units of rood and ,I 00 units of clothing. We can do exactly the same thing for Europe. But Europe’s look different from America’s because Europe has different in producing food and clothing. Europe’s price ratio is :y~.reflecting Europe’s relative productivity in food and clothing.
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