Posts tagged comparative advantage
Reasons for Trade
Sep 18th
Syllabus requirements:
Reasons for trade
• Differences in factor endowments
• Variety and quality of goods
• Gains from specialization
• Political
Higher level extension topic
• Absolute and comparative advantage (numerical and diagrammatic representations)
• opportunity cost
• limitations of the theory of comparative advantage
The first bullet points should be quite well understood by most students after a little research and careful thought.
This classic clip featuring Milton Friedman is often used as an argument for the free market, but I think it works particularly well as an argument for international (free) trade:
Power of the Market – The Pencil uploaded by LibertyPen
The Higher Level topics, particularly the concept of Comparative Advantage are trickier. However, the theory of comparative advantage is a vital argument in favour of international trade, and one well worth revising until you are confident that you understand it fully. Be sure to use diagrammatic explanations using PPFs, as well as numerical examples. Visit the following two related links in this order:
Economics Game: Ricardo, Coconuts and A Desert Island
Understanding Comparative Advantage
In addition, these excellent slideshows hosted on reffonomics.com will help you, particularly with the diagrams aspect.