Comparative advantage , specialization and gains from trade.
Robin and Terry are Stranded on a deserted island and consume two products, coconuts and fish. In a day, Robin can catch 2 fishes or gather 8 coconuts, and Terry can catch 1 fish or gather 1 coconut.
Assume that each person is initially sely - sufficient. In a six-day week, Robin produces and consumes 32 coconuts and 4 fishes, and Terry produces and consumes 4 coconuts and 2 fishes. Show that specialization and exchange (at a rate of 3 coconuts per fish) allows Robin to consume more coconuts and same number of fish and allows Terry to consume more coconuts and same number of fish. Illustrate the answer with a graph.