More abundant a factor, lower the relative cost.
Different countries have different factor endowments.
The Leontief Paradox (1953)
Tested H-O Theory using US data for 1947.
USA is relatively abundant in capital, so according to H-O The
Foreign direct investment (FDI) is an investment made by a company/individual
in one country in business interests in another country, in the form of either
establishing business operations (Greenfield) or acquiring business assets in the
Levels of economic integration:
Free trade area (NAFTA)
Economic union (EU)
Case for regional integration:
Stimulates economic growth in countries
Countries specialise in those goods/services efficientl
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Group Coursework 30%
(2 elements: group case study presentation (30%) & 2000 word report, 6th Dec (70%)
Invisible hand Adam Smith
Unintended social benefits of individual actions
In 2006 the EU introduced tariffs on Chinese (16%) and Vietnamese (10%) shoe imports. They
viewed these as anti-dumping policies (due to unfair competition).
Tariffs the oldest form of trade policy. Specific tariffs refer to fixed tariff
Externalities are known as the third party effects evolving from
the production and consumption of goods and services in which
the third party does not receive any appropriate consumption.
Externalities are the root to market failure if the pricing system