Purpose:

A game that introduces the concepts of absolute and comparative advantage in international trade.

Learning Objectives:

At the end of the game, students should be able to:

• Explain the principle of absolute advantage
• Explain the principle of opportunity cost and be able to do some basic calculations to work out opportunity cost ratios
• Explain the principle of comparative advantage
• Explain the meaning of 'terms of trade'
• Comment on the role of power relations in trade

Requirements:

• For each student:
  • Printed out activity sheet
  • Record sheet one
    • HTML version
    • Word version
  • Record sheet two
    • HTML version
    • Word version
  • A pair of scissors
  • A pencil
  • A ruler
  • Two templates (backed onto card) - one of each shape for one of the countries only
• Large amount of scrap paper
• Instruction sheet showing the specifications of the star and triangle
• Prompt cards

Timing:

2 x 1 hour lessons

Method:

1. The concepts of absolute and particularly comparative advantage are often ones that present problems to students. This game provides an opportunity of introducing these concepts through an active lesson providing a focus for discussion on the more theoretical aspects following the game.
2. The whole activity is based around two lessons - the first for the game itself and the second for the discussion of the issues arising. It should be made very clear at the outset that this is a game that is not competitive - there is no reward for one country winning because there is effectively nothing to win!
3. The aim of giving out the templates is to help emphasise the principles of absolute and comparative advantage. The team with the template can use them to draw around and having one of each shape gives that team a clear absolute advantage in the production of both shapes. However, the template is more of an advantage in producing stars compared to triangles given that stars are more difficult to draw freehand thus the team with the templates also has a comparative advantage.
4. Split the class into two countries and get them to decide on a name for their country. Explain what they have to produce putting the exact measurements on a sheet of paper placed around the room or made clear on a board. (If you put the exact measurements on a sheet of paper it is advisable to enlarge it slightly on a photocopier to prevent students from taking the paper and using it as a template or cheating!)
5. Emphasis that they must produce one shape at a time and that they will be given equal amounts of time to devote to the production of each initially. Emphasise also that they must not attempt to use multiple sheets of paper and cut out the shapes - this will ruin the outcome of the game. This is partly why it is important to stress the learning outcomes rather than any sort of competition between the two countries.

Round One

6. The class is given ten minutes to produce the commodities - five minutes for stars and five for triangles. Warn students with 30 seconds to go for each activity. Ensure that the time limit is adhered to strictly - when the time is up any partially completed commodities are not counted.
7. Record the number of commodities produced on the board at the end of the round and get the students to complete Record Sheet One. The country with the templates should have produced more of both stars and triangles. At this point use the outcome to explain the concept of absolute advantage.
8. Now ask students whether they think there will be any benefit to trading. The general response is that the country with the templates has nothing to gain. Get the students to calculate the opportunity costs of producing the goods in the two countries completing the results in Record Sheet One. (You may have to demonstrate this with an example.)
9. The principle of comparative advantage can now be introduced based on these calculations.

Round Two

10. Each country is given a further ten minutes of production time. This time, each country specialises - the country with the templates produces stars and the other country triangles.
11. At the end of the ten minutes, the total output is recorded onto Record Sheet One. Total world output should have increased as a result of the specialisation and this can be shown on the Record Sheet.

Round Three: Trading

12. The two countries can now be given an opportunity of trading with each other. They should spend the first part of this session discussing between themselves what rate of exchange they are looking for. It is advisable for each group to nominate one person to act as the trade negotiator.
13. When the trade terms have been agreed, trading can take place. The results can then be recorded onto Record Sheet One. The results should mean that both countries end up better off compared to the situation at the end of round one.
14. The amount by which each country has benefited will depend on the way in which the trade negotiations have been conducted. This is a useful way of being able to explain power relationships in world trade. This can be made more explicit by attaching conditions to the trade negotiations by using the prompt cards.

Record Sheet Two

15. The second lesson can be used to discuss some of the outcomes of the game. The student uses the sheet to record some of the outcomes of the discussion. The emphasis should be on the assumptions that are inherent in the theory of comparative advantage and how these assumptions might not hold and what the implications are of this on trade in the real world.
16. The results of the discussion give students some notes from which to revise the topic.