ECO201 MOD 4 CASE

Running Head : Free trade

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Free trade

Institution

Date

Free trade

Trade affects production possibility frontier (PPF ) positively due to existence of comparative advantage between two or more countries . Trade makes a country to maximize the production of the product in which it is capable of producing leaving room for foreign trade to supply the other products . PPF is the maximum production of two or more commodities at the existing technology and hence trade enables a country to maximize the production of one commodity which leads to a

rightward shift in the PPF curve (Friedman , M . 1997

Other factors which expand the production possibility frontier are the availability of and technology for the production of the commodities Availability of resources in a country leads to a high production of the commodities which in turn expands the PPF by shifting the curve to the right . An updated technology in a country also leads to high production of the goods and services which shifts the PPF curve to the right

Free trade creates better opportunities for investment together with entrepreneurship in the countries which engage in the trade (Friedman M . 1997 . Some countries provide good political and economic climate for investment and through free trade member countries are able to access the markets from the other countries . The freedom to access market across different countries within the free trade region makes citizens of these countries to be in a position to invest in other countries which have good business climate and these...