Fernando M. Reimers et a1.

Activity DE.1.4

Understanding Free Trade and ComparativeAdvantage
Using the example of Bob and Ann, who are stranded on an island and
working toward surviving and trading items with each other, students
are introduced to the concepts of absolute advantage and comparative
advantage.

The following sample lesson plans introduce the concept of comparative
advantage:

0 http://www.econlib.org/library/Enc/ComparativeAdvantage.html

0 http://www.flatworldknowledge.com/pub/international—trade—
theory—and/199668#web—199668

0 http://www.imf.org/external/np/exr/center/students/hs/think/les—
son4.pdf

After they have developed an understanding of comparative advantage, the
students will further extend the concept of comparative advantage to the
concept of free trade among nations and will undertake a detailed analysis
of the data they collected in activity 1.

In this analysis, students will learn about correlations (this learning will be
teacher led) and draw out correlations and associations between growth
rates, increases in GDP, unemployment rates, and the levels of trade in Latin
America. The goal is for them to understand whether standards of living
have indeed increased because of trade in the region as a whole or in particu—

lar countries with higher levels of trade.

Finally, using the case of Latin America, students will write a position paper
on how international trade might result in greater benefits for all. Students can
refer to the following article as an example of What might be expected: http://
www.econedlink.org/lessons/docs_lessons/575_international_trade1 .pdf.

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