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WK4_8Sept_Ch_4_corrected

# WK4_8Sept_Ch_4_corrected - Week 4(Thursday Sept 8 2011...

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Continue with Chapter 4 Trade: Factor Availability and Factor Proportions are Key Week 4 (Thursday, Sept. 8, 2011)

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Heckscher-Ohlin Model Pattern of Trade and Gains from Trade 1. Factor abundance and factor intensity 2. Increasing opportunity cost & slope of PPC 3. Incomplete specialization 4. Pattern of trade predictions 5. Trade Triangle (exports and imports) 6. CPC with trade Income Distribution Effects 7. Short Run, Medium Run, Long Run 8. Long run: Stolper-Samuelson Theory
Basket A: Qw=22, Qc=0 Basket B: Qw=21, Qc=6 WHEAT A B -1W C: Qw=19,Qc=10 D: Qw=15,Qc=16 -4W E : Qw=13, Qc=20 F: Qw=0, Qc=26 -13W +6C +6C +6C CLOTH The slope of the PPC is the marginal cost of an extra unit of C. Slope in the region of A = -1 W: +6 C Pc/Pw= 1/6 W per C Slope in the region of C = -4 W: +6 C Pc/Pw= 4/6 W per C Slope in the region of E = -13 W: +6 C Pc/Pw= 13/6 W per C In autarky, the slope equals autarky price of cloth

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Heckscher-Ohlin or Factor Endowments Model Within a country Two Goods: C and W Each requires two resources to produce: labor (L C and L W ) and Land (T C and T W ) Stock of Labor: L Stock of Land: T
Two New Concepts Factor Intensity How resources combined to produce output Factor Abundance Relative supply of resouces

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WK4_8Sept_Ch_4_corrected - Week 4(Thursday Sept 8 2011...

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