Comparative Advantage: Answering Some Student Questions

Abstract

Most textbooks of international trade deal with comparative advantage with money prices in a cursory manner, if at all. Students on the other hand think primarily in terms of money prices and tend to think of higher productivity solely in terms of lower prices. This paper provides a step by step exposition of comparative advantage and trade using money prices and exchange rates, taking as the initial starting point the student perspective of productivity and comparative advantage, typically a disequilibrium perspective. Such an exposition, used in conjunction with the traditional exposition, may be of added benefit to students in internalizing the concept of comparative advantage.