Authors libby rittenberg 91
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food production to computer production. Once the shift is made, though,
there is no effect on employment in either continent.
Of course, this idealized example would have all of South America’s
computer experts becoming farmers while all of Europe’s farmers become
computer geeks! That is a bit much to swallow, but it is merely the result of
assuming linear production possibilities curves and complete
specialization. In the real world, production possibilities curves are
concave, and the reallocation of resources required by trade is not nearly
as dramatic. Still, free trade can require shifts in resources from one
activity to another. These shifts produce enormous benefits, but they do
not come without costs.
Nearly all economists agree that largely unrestricted trade between
countries is desirable; restrictions on trade generally force the world to
operate inside its production possibilities curve. In some cases restrictions
on trade could be desirable, but in the main, free trade promotes greater
production of goods and services for the world’s people. The role of
international trade is explored in greater detail in subsequent chapters of
this book.
Economic Growth
An increase in the physical quantity or in the quality of factors of
production available to an economy or a technological gain will allow the
economy to produce more goods and services; it will shift the economy’s
production possibilities curve outward. The process through which an
economy achieves an outward shift in its production possibilities curve is
calledeconomic growth. An outward shift in a production possibilities
Attributed to Libby Rittenberg and Timothy Tregarthen
Saylor URL: />
Saylor.org
91
