ABSTRACT
Equation (4.11) shows that the slope of the transformation curve is the same as the ratio of commodity prices. Note further that the ratio of prices is the same as the ratio of labour productivities, thus
(4.11)
Figure 4.3
and that would not be profitable. This is easily demonstrated. By giving up T' C the system only obtains AC in the technological manner, but can obtain CA' in the market. Hence, the economy would be losing AA' by shifting into producing X1 when the price ratio is given by the slope of TB. A similar argument applies for specialization in X1 for prices flatter than the slope of TT'.
