Work through the list without notes. If you cannot do a statement, follow its link, then come back. Guide = study guide; Practice = practice questions.
Understanding
- I can define absolute advantage and comparative advantage in one sentence each, and say how they differ. (Guide: “Absolute advantage” and “Comparative advantage”)
- I can explain why specialisation should follow comparative advantage, not absolute advantage. (Guide: Worked example 1(c); Practice Q7(a))
- I can explain why, with two goods and two producers, each producer has the comparative advantage in a different good, and what happens when costs are equal. (Guide: “Comparative advantage”; Practice Q7(c))
- I can explain why trade lets a country consume outside its PPC without shifting the PPC. (Guide: Worked example 3 and Figure 2)
Calculation and graphing
- I can find absolute advantage and both opportunity costs from output data, with units. (Guide: Worked example 1; Practice Q1)
- I can find absolute advantage and both opportunity costs from input data, and check by converting to output. (Guide: Worked example 2; Practice Q2, Q4)
- I can draw two PPCs on one labelled graph and read absolute advantage from the intercepts and comparative advantage from the slopes. (Guide: Figure 1; Practice Q5)
- I can calculate total output before and after specialisation. (Guide: “Specialisation and gains from trade”; Practice Q6(a)–(b))
- I can calculate each side’s consumption and gain after trade at given terms. (Guide: Worked example 3; Practice Q6(c)–(d))
Reasoning
- I can state the range of mutually beneficial terms of trade and explain why it lies between the two opportunity costs. (Guide: “Terms of trade”; Practice Q3)
- I can test a proposed rate and say which side would reject it, and why. (Practice Q4(c)–(d), Q7(b))
- I can show with a calculation that a point after trade is outside a country’s own PPC. (Practice Q5(c), Q6(d))
All ticked? Move on to Topic 1.5, Cost-Benefit Analysis, or return to the course roadmap.