ECON 232 Study Guide - Final Guide: Price Elasticity Of Demand, Free Trade, Comparative Advantage
Document Summary
Openness to trade: trade/gdp and growth in gdp are identical. Counter example: us (story, no need to trade) Inter region trade( eg, from penn to ohio) Britain first embrace to trade, not an outlier(us is) As for the causation, we just focus on the supply side and just ignore the demand side. Exodogenous reasons: trade costs decreases because of (1) trade policy (2) transport costs decreases: steam power/ocean supply, trains. Heckscher-ohlin and trade-induced convergence: factor prices vs. income per capita. They export goods produced cheaply and import goods produced expensively. Heckscher-ohlin sprediction are: input price will converge(but not necessarily income per capita convergence. ), income will be redistributed and incomes might converge. Canada exports wheat to uk because wheat uses land intensively and land relatively cheap in. Uk exports locomotives to canada cause loco use skilled labor intensively and skilled labor cheap in uk.
