International trade: Comparative advantage
(A tale of two tribes)
To familiarise students with the theoretical foundation of trade, this lesson plan is prepared to provide teachers with alternative lesson
designs when introducing the concept of comparative advantage, specialisation and the resulting gains.
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Lesson Plan for S5 Economics
Time required: 80 minutes
Topic: Comparative Advantage
(A tale of two tribes)
Objectives:
After the lesson, students will be able to
1. recognise and explain the difference between absolute advantage and comparative advantage.
2. evaluate why a person or nation with absolute advantages in producing two goods can nonetheless benefit from voluntary trade.
Pre-requisite knowledge: trade, opportunity cost, specialisation
Materials needed
1. A power-point presentation of the story, and
2. Worksheet (1)
2
Steps
Student activities
1. The teacher tells the students a story with the
help of three students to play roles [with the
help of powerpoint (up to the 24th slides)]. The
three helpers should be given time for
preparation before the lesson.
--
2. Teacher asks students whether David's plan
-will raise the outputs of wood and fish. Why
or why not?
Target content / Skills
--
Remarks
Students have opportunities
to practice role play,
narration and related skills.
Students suggest different
reasons to support their answers.
Teacher should
encourage
For more able students, they are
encouraged to work out a plan
that can increase total outputs of
the two tribes.
different
suggestions.
3
Steps
3. Teacher distributes the worksheet to students
and asks them to answer the questions and
evaluate the plan suggested by David.
Students may do this individually or in small
groups.
Student activities
--
Students form groups, discuss
and complete the worksheet.
Target content / Skills
--
Remarks
Students should be able to
find that the total output of
the two tribes will increase
if they can re-arrange the
tasks of workers in a
suitable way.
When the students have finished the
worksheet, teacher asks students to explain
their answers.
--
Students provide and explain
their answers to the class.
--
Students should be able to
find that, given a
favourable terms of trade,
after specialization and
trade, both trading parties
gained.
4. Debriefing (1)
With the help of the powerpoint (slide 25 to
slide 29), teacher introduces the concepts of
absolute advantage and comparative
advantage. Teacher asks students to apply
these concepts in Worksheet.
-Teacher asks students the following questions
to make sure that they know how to calculate
the opportunity cost and identify the
comparative advantages.
--
Apply the concept of
opportunity cost to identify
the comparative advantages
of different tribes.
Students work out the concept of -comparative advantages of
different tribes by applying the
concept of opportunity cost.
Students should be able to
tell the difference between
the concepts of absolute
advantage and comparative
advantage.
Teacher may
need to review
the definition of
opportunity cost
if necessary.
4
Steps
Student activities
(a) What is the opportunity cost of 1 unit of
wood in terms of fish in Engia?
(b) What is the opportunity cost of 1 unit of
wood in terms of fish in Portigia?
(c) Which tribe has comparative advantage in
Target content / Skills
--
collecting wood?
(d). What is the opportunity cost of 1 unit of
fish in terms of wood in Engia?
(e) What is the opportunity cost of 1 unit of
fish in terms of wood in Portigia?
(f) Which tribe has comparative advantage in
catching fish?
students would appreciate
that in order to increase the
total output, persons,
organizations or country
should specialize in
producing the product in
which they have
comparative advantages
5. Teacher asks the students the following
-questions to make sure that they know that
differences in opportunity costs is a necessary
condition for beneficial trade.
(a) Will the tribes accept David's suggestion?
Students discuss and give their
answers. Teacher may need to
provide hints in the form of
scenario (e.g. a fisherman
refused to abandon fishing for
wood gathering because of
factor like family tradition etc.).
(b) Ask them to explain why the tribes may
not accept the plan even when mutual
benefits are expected.
Remarks
--
Some students may be able to
suggest reasons for no trade
between the tribes. Teacher can
-
Students should know that
difference in opportunity
costs is a necessary
condition but not a
Teacher should
sufficient condition for
also note that
mutual beneficial trade.
tribes can adopt
There are some factors that
may hinder trade, such as
unfavourable terms of
trade, refusal to learn new
skills for some workers,
complete
specialization or
partial
specialization.
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Steps
Student activities
(c) Teacher helps students to list and
summarize some of such factors.
--
relate their reasons to real life
events/news reports.
Some students may be able to
see that there are some factors
that hinder trade even when
mutual benefits are potentially
available
6. Conclusion
Teacher reviews the idea of comparative
advantage with the students, and discusses
how specialization according to
comparative advantage is the basis for
mutually beneficial trade.
Target content / Skills
-
Remarks
absence of trust, cost of
transportation, a state of
war existed etc..
Students have opportunities
to relate real life
observations with economic
explanations to factors
leading to “no trade”
situation.
Teacher could
explain to
students that the
immense
improvements in
material living
standards over
the long history
of mankind can
be attributed to
trade within and
among countries.
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A Tale of Two Tribes
The story
On an island, there lived two isolated tribes, Engia and Portigia.
collect wood from the forest.
In order to survive, they needed to catch fish from the sea and
There were 20 workers in each tribe. The workers of Engia could collect 80 units of wood or catch 120
units of fish in one day while the workers of Portigia could collect 200 units of wood or 160 units of fish. Initially, the chief of each
tribe assigned 10 workers to collect wood and the other 10 to catch fish. All of them were satisfied with this arrangement.
One day, an adventurer called David arrived. He discovered these tribes and was surprised to find that their production
arrangements were so inefficient. Based on his training in economics, he was confident that he could improve their living standards by
changing the production arrangements. He urged the chiefs to discuss this issue.
The following was their conversation:
David: Based on my knowledge in economics, specialisation would increase output.
Why don't you do so?
Trade would improve living standards.
Chief of Engia: I don't think the portigia will cooperate with our tribe because they are superior to us and more productive.
would they do that without any benefit to themselves?
Chief of Portigia: We can collect more wood and catch more fish than they can with the same number of workers.
if we trade with them. I can't see any reason for cooperation.
Why
We may suffer
David: Let me tell you my plan.
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Variation
If the students in your school are more able, you may give some time for them to guess
David’s suggestion, or even work out their own plans to raise the total output of fish
and wood. You may let students explain their plan or compare the one suggested by
David in the following conversation.
David turned to the Chief of Engia.
David: You, the chief of Engia, should ask all your workers to catch fish and collect no wood...
Interrupted by the Chief of Engia.
Chief of Engia : No, we will die of cold if we don't have wood to burn at night.
David: Don't worry, Portigia will provide your tribe with wood if you give fish to them.
He then turned to the Chief of Portigia.
David: Since you are more productive in both tasks, I don't advice you to limit yourselves to only one. I suggest that you should
send 15 workers to collect wood and 5 workers to catch fish. Also, don't worry about the fish; you can get them from
Engia. I guarantee that both of you can get more fish and wood than before if you follow my suggestion.
After the conversation, both chiefs still hesitated to follow David's plan.
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