•Texas Council on Economic Education

1. What are three examples of personal financial literacy standards that students must know for graduation?

2.Please review the standards for your grade level and/or subject: World Geography World History U. S. History Government Economics

Presented by Laura EwingPresident/CEO Texas Council on Economic Education

1801 Allen ParkwayHouston, TX 77019P: 713.655.1650F: 713.655.1655

www.economicstexas.org

From Focus: Globalization by the national Council for Economic Education

Question: What is a comparative advantage?What is an example of a comparative advantage?

Nations and individuals have a comparative advantage when their opportunity cost of producing a good or service is lower than the opportunity cost of other nations or individuals.

1. Students use trade data for China and the U.S. to determine the comparative advantage for the countries.

2. They study trade data for four mystery countries and predict what their comparative advantage might be and predict the names of the countries.

3. They will apply the ideas by looking at Shaquille O’Neal and his abilities as a basketball player vs. rap singer.

4. Students will identify their own sources of comparative advantage by completing an inventory of skills and comparing those skills with several job descriptions.

1. Ask students to define a comparative advantage and give an example.

2. Remember: Individuals or nations have a comparative advantage in producing a good or service if they can produce it at a lower cost than other individuals or nations and then buy others’

goods /services that they can produce at a lower cost.

3. What do you think the topic of today is? Why study this topic?

1. What is your specialty?

2. What do we mean by specialization in the business world?

1. People do not produce all the things they need. They produce a good or service and then buy the other products.

2. More goods and services are produced with specialization which reduces the cost.

3. Do you cut your own hair? If no, who does? Why?4. What skills are needed to cut hair? What do you give up to

learn how to cut hair? 5. What is the opportunity cost of going to school to learn how

to be a hair stylist?

Did early settlers, colonists and pioneers cut their own hair or have a family member cut it? Why or why not?

Are the haircuts today better quality than the ones during the earlier times? Why or why not?

How and why do athletes specialize? How does this fit with the concept of comparative advantage?

1. What goods and services does the U. S. produce well?

2. What goods and services does China produce well?

3. Use the term comparative advantage, imports and exports to explain about the trade relationship between the U. S. and China.

U.S. top trade partners in 2004 for total trade were: 1. Canada $466 billion2. Mexico $266 billion3. China (see Activity 1)4. Japan $184 billion5. Germany $108 billion

Working individually: 1.read Activity I2.Answer the questions on page 86 using the charts on page 86

Discuss your findings with the class.

See Visual I

1. Natural resource endowments2. Government services and regulations (e.g. environmental

regulations, educational opportunities, impact on productivity)

3. Investment in technology

Use Activity I on page 87 to answer: Which of these are examples for China? Which of these examples are for the U. S.?

Why the difference between the U. S. And China?

United States China

High-skilled labor Low-skilled labor

Technology Less technology

Use pages 88, 89, 90, 91, 92

1. Does the U. S. import the same products from each country?

2. Circle the bullet that best describes the exports to the U. S.

3. What is the most likely source of comparative advantage?

4. Who do you think the countries really are?

A. HondurasB. GermanyC. IndiaD. Nigeria

Individual A Skills/Characteristics 7’1” 310 pounds

Bench press 310 miles Shoe size: 21 EEE NBA scoring average: 26.4

points/game Annual NBA salary $27 million 5 rap CDs; 2 million in CD sales

Individual B Skills/Characteristics 6’4” tall 220 pounds Invited to try out with NBA Toronto

Raptors, Cut after one week Annual NBA salary $0.00 11 rap CDs; more than 15,000,000 in CD sales

A: Shaquille O’Neal, center for Miami Heat, LA Lakers, Orlando Magic

B: Master P (aka Percy Miller) rap artist who

played college basketball and tried out for

several NBA teams.

1. Complete Human Capital Inventory on page 93 What skills do you have now and

what skills yill you probably have in the future?

2. Using a computer, complete page 943. Students share their answers

1. Divide into groups of 42. You will role play a business consulting

firm.3. Create a name for the business4. Mali government has hired you to

increase Mali’s revenue from international trade

The three main sources of comparative advantage are:

How do you summarize the main points of the activity?

How will use this lesson in your class?

Looking at Visual 3, develop a brochure to provide recommendations. Include :

1. Describe the theory of comparative advantage2. Mali’s potential comparative advantage3. How does specialization can lead to

gains from trade?