06 Heckscher-Ohlin Model, Part 1

06 Heckscher-Ohlin - Heckscher-Ohlin Model Part 1 A Two-Factor Autarky Economy Agenda Assumptions A Two-Factor Autarky Economy Production

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
1 1 Heckscher-Ohlin Model, Part 1 • Agenda – A Two-Factor Autarky Economy. – Production Possibilities – Goods Prices – Factor Prices and Factor Levels – Goods Prices, Factor Prices, and Factor Levels 2 A Two-Factor Autarky Economy • Assumptions: – Only 2 countries: Home and Foreign. • Both countries’ economies are characterized by profit maximization and perfect competition. – Only 2 goods: Cloth, C, and Food, F. 3 A Two-Factor Autarky Economy • Assumptions: – Only 2 factors of production: Land, T, and Labor, L. • Factors of production are constant within each country. • Factors of production vary between countries. 4 A Two-Factor Autarky Economy • Assumptions: – Competition allows the factors of production to be paid a “competitive” return. • A function of their productivities and the price of the good that they produce.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
2 5 A Two-Factor Autarky Economy • Assumptions: – Factors of production are mobile between industries within a country but are immobile between countries. • Allows factors to be used in the industry that pays the highest return. 6 A Two-Factor Autarky Economy • Assumptions: – There are constant factor proportions . 7 A Two-Factor Autarky Economy • Assumptions: –a TC = acres of land used to produce 1 unit of cloth. –a LC = hours of labor used to produce 1 unit of cloth. –a TF = acres of land used to produce 1 unit of food. –a LF = hours of labor used to produce 1 unit of food. – L = economy’s total supply of labor.
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 02/25/2012 for the course ECON 181 taught by Professor Kasa during the Spring '07 term at University of California, Berkeley.

Page1 / 9

06 Heckscher-Ohlin - Heckscher-Ohlin Model Part 1 A Two-Factor Autarky Economy Agenda Assumptions A Two-Factor Autarky Economy Production

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online