Note on Trade and Comparative Advantage

by: Robert E. Kennedy

Publication Date: December 17, 2009
Length: 10 pages
Product ID#: 1-428-934

Core Disciplines: Economics, International Business, Strategy & Management

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Teaching Note

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Whether nations benefit from trade is a question that has been passionately debated throughout history. The theory of comparative advantage is one of the more useful, yet frequently misunderstood, topics in economics and public policy. This note introduces the theory of comparative advantage. A companion note, “Beyond Comparative Advantage: Theories of Strategic Trade” (WDI case # 1-428-935) introduces modern approaches, including game theory and strategic trade.

Teaching Objectives

After reading and discussing the material, students should:

  • describe appropriate business terms and principles approriate to this case,
  • apply critical concepts from earlier learning to define a solution to the case,
  • successfully articulate data and information in support of the solution proposed,
  • critically analyze and discuss other responses and solutions to the case,
  • draw lessons from the case analysis,
  • generalize the learnings of this case to other business challenges and decisions in organizations other than the one analyzed in this case study,
  • demonstrate leadership and scholarship in analysis.