Week 13 — International Trade & Comparative Advantage
Why this matters
A business major pricing imported parts and a warehouse worker at a port both work inside this week's ideas.
In plain language
This week asks why whole countries trade, and who gains when they do. The answer starts with a familiar idea: every choice gives something up. A country gains by making the goods it gives up the least to make, which is its comparative advantage (the lower cost of a good, counted in the other good you give up). When two countries each make what they are relatively good at and swap, both can end up with more of everything. You will also learn to read a trade deficit calmly, and to weigh the arguments for and against taxes on imports without picking a side for you.
- Already covered: Week 1 taught opportunity cost, and Week 2 built net exports.
- This week: comparative advantage, the terms of trade, the gains from trade, the trade balance, and tariffs.
- How they connect: opportunity cost decides who should make what across a border.
- Where we're going next: Week 14, Open-Economy Macro: Exchange Rates & the Balance of Payments.
Focus
Why do countries trade, and how can both sides gain?
By the end of this module, you should be able to:
- [ ] build an opportunity-cost table and name the comparative advantage
- [ ] find terms of trade that benefit both countries
- [ ] prove the gains from trade with a before-and-after table
- [ ] read a trade deficit neutrally and weigh tariffs fairly
To-do
Plan your week
- Read Chapter 13 (45 minutes), then the lecture and slides.
- Work the tutorial (60–90 minutes) and practice set (20 minutes).
- Do the Model Workshop (90 minutes), discussion, and assignment.
- Take the quiz.
This week's checkpoint: one cloth costs 2 wheat in Northland and 3 in Southland, so who makes the cloth?
You've got this
Say the units first, compare costs, and ask your instructor early.
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