Econ 333 Sept 16

Econ 333 Sept 16 - Econ 333 Chapter 4: Factor Endowments...

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Econ 333 Chapter 4: Factor Endowments and the Commodity Composition of Trade
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Questions for This Week What determines a country’s comparative advantage? How does international trade affect industrial structure? How does international trade affect payments or returns to the factors of production? How does international trade affect the distribution of income?
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The Factor-Proportions Theory (Heckscher-Ohlin Model) Assumptions two countries, two goods perfect competition free trade incomplete specialization equal tastes and preferences two factors of production constant returns to scale domestic mobility of factors no migration of factors
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Factor Proportions Theorem (H-O Theorem) A country will have a comparative advantage in the good whose production is intensively uses the factor that country is relatively abundant in. A country will have a comparative disadvantage in the good whose production is intensively uses the factor that country is relatively scarce in.
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This note was uploaded on 09/23/2009 for the course ECON 333 taught by Professor Roberts during the Spring '09 term at Ill. Chicago.

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Econ 333 Sept 16 - Econ 333 Chapter 4: Factor Endowments...

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