1. International Trade

6. Specialisation

7. Consider Iceland

10. Icelandic industries Iceland's aluminium

11. Key theory

13. More cartoons here

15. So how does this link to International trade?

18. Your go… On your whiteboard Write UK on one side France on the other

19. Question… The UK and France have identical resources. Using all of these resources they can produce either cars or computers, or some combination of the two as shown above. TASK: Assuming constant returns to scale, state which country has an ABSOLUTE ADVANTAGE in the production of cars and computers in each of the above situations.

20. Question… The UK and France have identical resources. Using all of these resources they can produce either cars or computers, or some combination of the two as shown above. TASK: Assuming constant returns to scale, state which country has an ABSOLUTE ADVANTAGE in the production of cars and computers in each of the above situations. Absolute advantage with cars Absolute advantage with computers

21. Question… The UK and France have identical resources. Using all of these resources they can produce either cars or computers, or some combination of the two as shown above. TASK: Assuming constant returns to scale, state which country has an ABSOLUTE ADVANTAGE in the production of cars and computers in each of the above situations. Absolute advantage with cars Absolute advantage with computers

22. Question… The UK and France have identical resources. Using all of these resources they can produce either cars or computers, or some combination of the two as shown above. TASK: Assuming constant returns to scale, state which country has an ABSOLUTE ADVANTAGE in the production of cars and computers in each of the above situations. Absolute advantage with cars Absolute advantage with computers

23. Question… The UK and France have identical resources. Using all of these resources they can produce either cars or computers, or some combination of the two as shown above. TASK: Assuming constant returns to scale, state which country has an ABSOLUTE ADVANTAGE in the production of cars and computers in each of the above situations. Absolute advantage with cars Absolute advantage with computers

24. Question… The UK and France have identical resources. Using all of these resources they can produce either cars or computers, or some combination of the two as shown above. TASK: Assuming constant returns to scale, state which country has an ABSOLUTE ADVANTAGE in the production of cars and computers in each of the above situations. Absolute advantage with cars Absolute advantage with computers 20

26. A numerical example…

32. So what if they ‘traded? Each country specialises in what they are good at…. Absolute advantage…

36. The next stage

37. Comparative Advantage

41. Or put it in another way