The main focus of this essay is to discuss how the two countries can benefit from consumption of both goods they produce through specialization and trade. In this particular case, the two countries are Sri Lanka and Kenya, and the both goods they produce through specialization and trade are rice and tea. Initially no trade occurs. Both countries are facing trade-offs between producing tea and rice, where trade-off is an exchange of one thing in return for another, especially relinquishment of one benefit or advantage for another regarded as more desirable. Sri Lanka is able to produce either 1,000 bags of rice or 3,000 bags of tea. Kenya is able to produce either 1,000 bags of rice or 1,000 bags of tea. Also given the condition the two countries have similar resource endowments, Sri Lanka was consuming 400 bags of rice and 1,800 bags of tea. Kenya was consuming 500 bags of rice and 500 bags of tea. The opportunity cost of producing 1 bag of rice for Sri Lanka is 3 bags of tea, compared to 1 bag of tea in Kenya. Comparative advantage here refers to the ability of a country to produce a good in a lower opportunity cost, and the opportunity cost is the best alternative that is forgone when making a decision. Thus Sri Lanka should specialize in producing tea, and Kenya should specialize in producing rice. Specialization is a method of production where a business or area focuses on the production of a limited scope of products or services in order to gain greater degrees of productive efficiency within the entire system of businesses or areas, which simply means doing what an individual is good at. This is based on the Ricardo’s theory of comparative advantage, which states that specialization and trade will benefit all trading parties, even those that may be “absolutely” more efficient producers. Because Sri Lanka has a comparative advantage in producing tea, it