HKDSE Economics: International Trade Lesson-Prep Guide (for tutors)

2026-11-01

Tutor lesson-prep guides · Secondary economics

Students say every country has an advantage but guess who exports what. This lesson trains one move: turn production hours into opportunity cost, and the lower number exports.

Objectives — Students can (1) compute opportunity cost from production times and identify comparative advantage; (2) explain why specialisation plus trade raises consumption on both sides; (3) calculate the domestic price and quantity after a tariff, and convert an export price at a given exchange rate.

01 Prerequisites (3-minute check)

If any of these fails, fix it before the lesson starts.

Skill	Quick check	Pass mark
Opportunity cost	What does opportunity cost mean?	the value of the next best option given up
Percentages	From 100 to 120 is an increase of what percent?	20%
Division	780 divided by 7.8	100

02 Lesson flow (60 minutes)

Time	Stage	Tutor does	Student does
0-8 min	Absolute versus comparative	the difference	students give one example each
8-22 min	Opportunity cost	2 hours cloth against 4 hours wine	get 0.5
22-34 min	Gains from trade	trade 1 cloth for 2 wine	both consume more
34-46 min	Tariffs	price up, quantity down	120 dollars, down 16%
46-56 min	Exchange rates	depreciation and export prices	100 to 98.73 US dollars
56-60 min	Exit check	three questions, marked at the door	independent

03 Teaching script (read it out)

Scene 1: Absolute advantage versus comparative advantage

Absolute advantage means producing the same output with fewer resources; comparative advantage means a lower opportunity cost. Economy A needs 2 hours for a unit of cloth and 4 hours for a unit of wine, so one cloth costs 0.5 wine. Economy B needs 4 hours for cloth and 1 hour for wine, so one cloth costs 4 wine.
A has the lower cloth cost (0.5 against 4) and should export cloth; B exports wine. Even if A is faster at both goods, it should still specialise in cloth only.

Ask the student: if A is also faster at wine, should it still make its own wine? (No, its opportunity cost is too high.)

Scene 2: After specialisation both sides consume more

Before trade A splits eight hours into 2 cloth and 1 wine, B into 1 cloth and 4 wine: 3 cloth and 5 wine in total.
With specialisation A makes 4 cloth and B makes 8 wine. Trading 1 cloth for 2 wine leaves A with 3 cloth and 2 wine, and B with 1 cloth and 6 wine. A moves from 2 cloth and 1 wine to 3 cloth and 2 wine; B from 1 cloth and 4 wine to 1 cloth and 6 wine.

Warn: the terms of trade must sit between the two opportunity costs, between 0.5 and 4 wine per cloth, or one side refuses to trade.

Scene 3: Tariffs and exchange rates: two price tools

A world price of 100 dollars with a 20% tariff gives a domestic price of 100 x 1.2 = 120 dollars; quantity demanded falls from 500 to 420 units, a fall of 16%.
An export priced at 780 HKD sells for 780 / 7.80 = 100.00 US dollars. If the rate moves to 7.90 HKD per dollar the price becomes 98.73 dollars, so foreign buyers pay less and quantity exported rises. Currency appreciation does the opposite.

Ask the student: the same 780 HKD good at a rate of 7.5 costs how much abroad? (104 dollars.)

04 Question types and worked steps

Type	Example	Steps	Answer
Calculation	opportunity cost	ratio of production times	0.5 wine
Judgement	who exports what	compare opportunity cost, not speed	A exports cloth
Calculation	price and quantity after a tariff	P x (1 + t)	120 dollars, down 16%
Conversion	exchange rate and export price	local price divided by the rate	98.73 dollars

Sanity check (teach this): A tariff always raises the domestic price above the world price and cuts import quantity; an answer below the world price means the student treated the tariff as a discount. Exchange-rate answers must stay in the same order of magnitude as the local price.

05 Independent practice (3 questions)

Question	Answer	What to watch
A needs 2 hours for cloth and 4 for wine; opportunity cost of one cloth	0.5 wine	divide the hours
domestic price of a 100 dollar good with a 20% tariff	120 dollars	multiply by 1.2
780 HKD at a rate of 7.90	98.73 US dollars	divide by the rate

06 Common mistakes and what to say

Mistake	Student writes	Say this
using absolute advantage to pick the exporter	A is faster at both, so it makes both	Compare opportunity cost, not speed.
inverting the opportunity cost	B: one cloth costs 0.25 wine	The cost of cloth must be expressed in wine, not the other way round.
treating a tariff as a discount	answers 80 dollars	A tariff adds to the price; it is not a discount.
depreciation read as making exports dearer	foreign buyers pay more	Depreciation lowers the foreign-currency price, so exports get cheaper.

07 Homework (paper, section and question numbers)

DSE economics practice paper (international trade) — Section B questions 4 and 5 (comparative advantage and tariffs)
Secondary economics chapter index — all chapters

08 Exit check (last 5 minutes)

Question	Answer	Decision
opportunity cost of one cloth in A	0.5 wine	all three right, move to trade policy
domestic price with a 20% tariff on 100 dollars	120 dollars	one wrong, re-teach tariffs
effect of depreciation on exports	foreign price falls, exports rise	two wrong, restart act one

09 Tutor FAQ

Does comparative advantage need two countries?

No. Two industries inside one economy work the same way; the logic is opportunity cost.

Who collects the tariff?

The importing government, equal to the price gap times the quantity imported.

Which exchange rate should be used?

Use the rate given in the question; 7.80 and 7.90 here are two teaching scenarios.

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A TutorZone lesson-prep guide. Written by the TutorZone team; questions and lesson flow are original and are not taken from any school or publisher material.