Material Detail

As a lead-in to discussions on supply and demand, students need to learn that trade leads to a higher standard of living than self-sufficiency. In the cooperative learning exercise, students are separated into groups representing one of two countries. Each group determines the allocation of hours across goods to maximize utility. Then, the groups/countries get together and try to negotiate trades that will increase their total utility. Because one country has an absolute advantage in both goods, students learn the role of comparative advantage in the gains from trade.

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