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- Trading with Comparative and Absolute Advantage Ac...
Trading with Comparative and Absolute Advantage Activity
Trading with comparative and absolute advantage
(cooperative learning, experiment)
Students are separated into groups, representing different countries, and given worksheets with production information. One country has an absolute advantage in both goods. Groups choose resource allocations to maximize utility and then can trade with the other country.
- For larger classes, can have multiple groups for each country (just have an equal number of groups for each country) and then pair up groups for trading.
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I used the exercise in class today and it was solid- but I would modify next time to simplify it a bit. I plan to remove the utility calculations and beef up the terms of trade calculation. In addition i would require students to graph the PPF. Reasoning: I think the utility calculation is tangent (and really is more about allocative efficiency, which can be handled in a separate PPF exercise) - the more important topic (terms of trade) is usually tough for students so I'd add a line or two supporting how to calculate the terms of trade range. Graph: if they are forced to graph then it's easier to see the gains from specialization and trade when moving from autarky to trade.
