Subject:
Economics
Material Type:
Module
Level:
Community College / Lower Division, College / Upper Division
Provider:
Ohio Open Ed Collaborative
Tags:
Comparative Advantage, Economic Growth, Economic Systems, Free Trade, Opportunity Costs, Production, Scarcity
License:
Creative Commons Attribution Non-Commercial
Language:
English
Media Formats:
Downloadable docs, eBook, Text/HTML, Video

Education Standards (6)

Trade offs and Comparative Advantage: Course Map & Recommended Resources

Overview

This topic is considered optional as it would primarily be part of a principles of microeconomics course. If microeconomics is a prerequisite for macroeconomics, this topic can either be skipped entirely, or could be reviewed briefly. In some macroeconomics principles courses, this may need to be presented as new information. Learning objectives of particular interest for a macro course are 1, 2, 7, and 8. Please note that some of the learning objectives contained in this section may overlap with the International Trade unit.

Learning Objectives

  1. Define the factors of production (2)
  2. Utilize the production possibilities frontier to model scarcity (2,16)

  3. Utilize the production possibilities frontier to model increasing opportunity costs (2,16)

  4. Utilize the production possibilities frontier to determine opportunity cost (1,16)

  5. Determine comparative advantage and resulting specialization (1,14)

  6. Determine the benefits of free trade, along with winners and losers (14,15)

  7. Identify different economic systems and their characteristics (1,2)

  8. Illustrate economic growth using the production possibilities frontier (1,2,13)

NOTE: This Module meets Ohio TAG's 1, 2, 13, 14, 15, 16 for an Intro to Macroeconomics Course

Recommended Textbook Resources

Important Notes for the instructor regarding this chapter:

The text provides a straightforward approach to the PPF. What is contained in the chapter might be more than what would be presented in an introductory macro course. Section 2.2 contains the critical portion of this concept.

Principles of Macroeconomics 2e: OpenStax CNX. Jun 4, 2018, Chapter 2, pages 27-44

Introduction to Choice in a World of Scarcity

How Individuals Make Choices Based on Their Budget Constraint

The Production Possibilities Frontier and Social Choices

Chapter Two: Key Terms

Chapter Two: Key Concepts and Summary

Chapter Two: Self Check Questions

Chapter Two: Review Questions

Chapter Two: Critical Thinking Questions

Chapter Two: Problems

Factors of production are discussed in 1.3: How Economists Use Theories and Models to Understand Economic Issues

Benefits of trade are more thoroughly covered in 20.1-20.2, but this topic is included in the unit on International Trade.

Economic systems are covered in 1.4: How To Organize Economies: An Overview of Economic Systems

Licenses and Attribution:
Principles of Microeconomics Chapter 2.2. Authored by: OpenStax College. Provided by: Rice University. Located at: http://cnx.org/contents/ea2f225e-6063-41ca-bcd8-36482e15ef65@10.31:24/Microeconomics. License: CC BY: Attribution

Supplemental Content/Alternative Resources

Production Possibilities

Lumen Learning: The Production Possibilities Frontier

Important notes for the instructor regarding this source: This is a unit on production possibilities from Lumen Learning. It includes some problems and questions, along with short videos.

Licenses and Attribution:

Comparative Advantage

Absolute and Comparative Advantage

Important notes for the instructor regarding this source. This provides a unit on comparative advantage, and includes some simple exercises.

Licenses and Attribution:

Attribution:

Topic Exercise

There is not a data exercise for this topic separate from the Active Learning Exercise below. Students will create their own data set, along with a graph, in order to analyze marginal opportunity costs.

An extension of the Active Learning Exercise is as follows:

  • Have students partner with each other to perform the same sets of tasks. They will complete the exercise individually, and then compare opportunity costs. With this information, have students create a single production possibilities frontier, combining their individual PPFs to create a bowed out curve.

Active Learning Exercise

Construct a production possibilities curve. Think of two activities that you might choose to do.

Consider products that would be produced as a result of these activities. Construct a graph based on these two activities, and label your axes with units of production per hour. Do NOT put production in terms of minutes spent on the activity. How many units of good A could you produce in one hour? How many units of good B could you produce in one hour?

For example, if one of your activities is studying for economics, instead of minutes spent studying, think of your production as pages read, or problems solved. If your other productive activity is working out, put your production in terms of number of repetitions or miles completed or calories burned.

Once the graph is completed, calculate the opportunity cost of each activity in terms of the others. It is acceptable to assume constant marginal opportunity cost for the sake of this exercise. Is this a reasonable assumption for your activities? Why or why not?