Chapter 4 Factor Proportions As determinant of Trade

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Presentation transcript:

Chapter 4 Factor Proportions As determinant of Trade Also will glance at Appendix B. Chapter 4. Who gains and who loses from trade?

Figure 4.1 Production Possibilities with Increasing Costs p. 51

Figure 4.2 Individual Indifference Curves. P 54 Figure 4.2 Indifference Curves. P 54. Community indifference curves are problematical. (p. 52) Can we simply add individuals’ curves? Some gain, others lose. Is difficult to compare welfare/happiness among people.

On Community Welfare, pp. 55 (52-53 in 13th edition) On Community Welfare, pp. 55 (52-53 in previous edition)

Figure 4.3 Indifference Curves and Production without Trade. P. 56

Figure 4.4 p. 57. Two views of free trade Chapter 4. Chapter 2. Figure 4.4 p. 57. Two views of free trade

Heckscher Ohlin Theorem (p. 63) A country will export the product(s) that use intensively its relatively abundant factor(s), and will import the product(s) that use its relatively scarce factor(s). Thus, the H-O comparative advantage model is actually a triple comparison: across countries across products across factors of production Heckscher Ohlin Theorem (p. 63). A country will export the product(s) that use intensively its relatively abundant factor(s), and will import the product(s) that use its relatively scarce factor(s). Thus, the H-O comparative advantage model is actually a triple comparison: across countries across products across factors of production

From Appendix B, pp. 665-669 From Appendix B, pp. 679-684

Figure B.1 p. 666. Using Isoquants to Illustrate Production Functions

Figure B.2. P. 667. Edgeworth-Bowley Box Diagram with Fixed Factor Proportions

Figure B.3 p. 667. Production-Possibility Curve Derived from Edgeworth-Bowley Box Diagram with Fixed Factor Proportions Figure B.3 p. 667. Production-Possibility Curve Derived from Edgeworth-Bowley Box Diagram with Fixed Factor Proportions

Figure B.4 p. 668. Identical Fixed Factor Proportions and the Production-Possibility Curve

Figure B.5 p. 683. Variable Factor Proportions and the Production-Possibility Curve