Indifference Curves are the locus of points representing combinations of commodities that as a whole have the same level of satisfaction. Equilibrium consists of getting to the highest indifference curve possible given the productivity of the country. An increase in the supply of a factor of production will cause a country to produce more of the products intensive in that factor.
Trade benefits the abundant factor and harms the scarce factor.
Critical Thinking Questions Consider Ricardo's example of the trade between England and Portugal, where England exports cloth and Portugal exports wine. Consider wages and interest rates in both countries. In each country, identify the winners and losers from trade.