Chapter 40 Trade occurs due to differences in production technology. The Ricardian model is constructed such that the only difference between countries is in their production technologies. All other features are assumed identical across countries.
Trade is advantageous for everyone in both countries.
Although most models of trade suggest that some people would benefit and some lose from free trade, the Ricardian model shows that everyone could benefit from trade. However, one of the reasons for this outcome is the simplifying assumption that there is only one factor of production. Even a technologically inferior country can benefit from free trade. This interesting result was first shown by Ricardo using a simple numerical example. The analysis highlights the importance of producing a country's comparative advantage good rather than its absolute advantage good.