Slides 5–32

Setting the Stage — Slides 5–9

1. Progress through Slides 5–6. Return to the activator example and tell students it will be used to explore whether trade is beneficial.
2. Proceed to Slide 7. Distribute 1 copy of Student Handout to each student. Explain that Thailand's production possibilities can be expressed graphically on a PPF and as a ratio. Click to reveal text and instruct students to record Thailand's maximum output of both goods on their handout.
3. Display Slide 8 and repeat Step 5 for Indonesia.
4. Advance to Slide 9. Reinforce that Indonesia is relatively better at producing both goods. Instruct students to discuss the prompt with a peer — do not provide the correct response yet, as students will return to this question later. Click to reveal text and explain that economists use comparative advantage to analyze the possible benefits of trade.

Determining Comparative Advantage — Slides 10–28

7. Progress through Slides 10–11. Tell students the next portion explains what comparative advantage is and why it matters. Explain that you will model the 4-step process — students will not be expected to replicate the steps on their own. Understanding the concepts matters more than performing the math.
8. Display Slide 12. Use the information to explain opportunity costs associated with production decisions and why they exist.
9. Advance to Slide 13. Tell students the opportunity cost is expressed as a ratio representing trade-offs in production. Click to reveal text and identify how the opportunity cost in Thailand, then Indonesia, can be written as a ratio.
10. Proceed to Slide 14. Explain the cost of producing bananas in terms of pineapples. To compare opportunity costs, simplify the ratios to determine how many pineapples each country gives up per banana produced. Click to reveal the process, pausing to explain each step. (See slide notes for further explanation.) Instruct students to record each country's opportunity cost of producing 1 banana on their handout.
11. Advance to Slide 15. Ask students to consider the question. Proceed to Slide 16 to reveal the correct response.
12. Proceed to Slide 17. Tell students that Thailand has a comparative advantage in banana production and define comparative advantage. Direct students to record this information on their handout. Click to reveal the definition of specialization and explain why Thailand will specialize in the good for which it has a comparative advantage. Emphasize that most individuals and societies engage in specialization.
13. Display Slide 18. Tell students you will now determine which country has the comparative advantage in pineapple production.
14. Progress through Slides 19–21, repeating Steps 8–10 for pineapple production. Direct students to record the relevant information on their handout.
15. Advance to Slide 22. Identify each country's point of production on its PPF when specializing in its comparative advantage good. Reinforce why comparative advantage matters — producers with a lower opportunity cost can produce a good more efficiently. Emphasize that while specializing countries use all resources on one good, they may still want to consume the other. Instruct students to indicate each country's specialization point on their handout.
16. Display Slide 23. Explain that terms of trade must be beneficial to both countries for trade to occur. Click to reveal the given terms of trade.
17. Proceed to Slide 24. Show Thailand's initial production and consumption point before trade. Click to reveal how many bananas Thailand exports and pineapples it imports, and the consumption point after trade. Instruct students to label Thailand's post-trade consumption point on their handout. Note: Students will likely be unsurprised that Thailand — which produced fewer of both goods — is better off after trade.
18. Advance to Slide 25. Ask students to recall their initial answer from Step 6. Emphasize that Indonesia is relatively better at producing both goods — and exaggerate that it seems hard to believe Indonesia benefits from trading with a country that is relatively worse at producing everything.
19. Display Slide 26. Show Indonesia's initial production and consumption point before trade. Click to reveal Indonesia's trade and final consumption point. Instruct students to label it on their handout.
20. Proceed to Slide 27. Reinforce that both countries consume outside their PPFs after trade — even though Indonesia is relatively better at producing both goods.
21. Advance to Slide 28. Emphasize that voluntary trade based on comparative advantage at beneficial terms mimics economic growth.

Tying It All Together — Slides 29–32

22. Progress through Slides 29–30. Direct students to complete the "Sum It Up" portion of Student Handout. (See slide notes for suggested responses.)
23. Proceed to Slide 31. Play the video clip to reinforce comparative advantage.
24. Advance to Slide 32. Acknowledge that specialization can have varied outcomes for stakeholders. Allow a moment for students to consider the question, then call on several volunteers. Supplement responses as needed — note that the opposite would be true in Indonesia. (See slide notes for suggested responses.) Encourage students to jot notes in the "Complications" section of their handout.