The Analysis of Ricardian Model under the Production Possibility Frontier

DOI

10.2991/icemse-16.2016.83How to use a DOI?

Keywords

Ricardo Model, production possibility frontier, comparative advantage, mathematical analysis

Abstract

Ricardian model as the cornerstone of the theory of comparative advantage considers a linear production possibility frontier and shows that the marginal rate of substitution is constant. However, production possibility frontier is often nonlinear in real life. In this paper we give a full mathematical analysis of Ricardian model especially under nonlinear production possibility frontier, find that comparative advantage makes total profits increasing and both win, and point out that both countries will win within the range of mutual beneficial trading prices. But, if both of the comparative advantages are not enough, the both countries will lose. For the line of formulating allocation is not parallel to the line of best optimal allocation, and the range of mutual beneficial trading makes the tangent of allocation lines within the tangents at the product equilibrium in closed system. Finally, several problems should be paid attention to the comparative advantage.

Copyright

© 2016, the Authors. Published by Atlantis Press.

Open Access

This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

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TY  - CONF
AU  - Ming Su
AU  - Xue-mei Dai
AU  - Qi Zhang
AU  - Yong-hui Zhou
PY  - 2016/12
DA  - 2016/12
TI  - The Analysis of Ricardian Model under the Production Possibility Frontier
BT  - Proceedings of the 2016 International Conference on Education, Management Science and Economics
PB  - Atlantis Press
SP  - 329
EP  - 334
SN  - 2352-5398
UR  - https://doi.org/10.2991/icemse-16.2016.83
DO  - 10.2991/icemse-16.2016.83
ID  - Su2016/12
ER  -