How is trade profitable for both countries involved? Surely one loses out in the end.

Question

How is trade profitable for both countries involved? Surely one loses out in the end.

In: Economics

Answer 1

I’m very good at making baskets. I can make 10 baskets each day. You’re very good at making chairs. You can make 10 chairs each day. We both want to have baskets *and* chairs.

I’m not so great at making chairs. I can make 4 per day if I put all my effort into chairs. But if I do that, I’m not making baskets. So on my own, I could maybe manage 2 chairs, and 5 baskets. Likewise, you on your own could do 2 baskets, and 5 chairs.

But if I make 10 baskets, and you make 10 chairs, and we then give each other half of our product, we both have 5 baskets and 5 chairs, and are thus both ahead.