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Definition
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Definition
| Curve which shows all the efficient allocations of resources inside the production (Edgeworth) box - or curve which joins all the points of tangency between the isoquants for the two goods inside the box |
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Definition
| Agreement between two or more countries in which (a) they have free trade with each other and (b) they have common external tariffs |
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| This occurs when international differences in consumer preferences reverse the pattern of trade that would have resulted from differences in relative factor endowments |
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| Factor intensity ranking of goods X and Y |
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Definition
| Comparison of the capital-labour ratios used in producing the two goods (good with higher ratio is described as relatively capital-intensive, other as relatively labour-intensive) |
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| Homogeneous production function |
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Definition
| A function such that the RTS (rate of technical substitution) is constant for all output levels if the capital-labour ratio is constant - or function such that the isoquants are Aparallel@ to each other along any ray from the origin |
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Definition
| This occurs when the deterioration in the terms of trade for a growing economy results in a decline in the aggregate level of utility/welfare/income |
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| Argument calling for the temporary imposition of an import tariff to protect a domestic industry until that industry can become more efficient and competitive |
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Definition
| Finding by Leontief that the United States= exports were labour-intensive relative to its imports |
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| Mercantilist foreign trade policy |
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Definition
| Policy which calls for regulation of foreign trade aimed at generating as large a trade surplus as possible |
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Definition
| This refers to a tariff on a final commodity (in the calculation of the effective rate of protection) |
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| Curve which shows the quantity of exports supplied and of imports demanded at various terms of trade (or price ratios) |
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Definition
| Tariff which maximizes the level of aggregate domestic income |
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| Overspecialization in right good |
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Definition
| This occurs when a domestic market imperfection or distortion results in exports or imports larger than what they would have been in the absence of that distortion or imperfection |
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| Price definition of relative labour abundance |
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Definition
| A country is relatively labour abundant if its wage-rental ratio is lower than in the other country |
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Definition
| Theory which states that goods have a "life" cycle, starting as new and later becoming mature and then standardized |
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| Rate of product transformation |
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Definition
| Quantity of one good which must be sacrificed to increase the production of the other good by one unit (also the slope of the production possibility curve or the opportunity cost of one good in terms of the other) |
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Definition
| States that an increase in the supply of one factor, everything else constant, will incresae the output of the good using the expanding factor relatively intensively and a decrease in the output of the other good |
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| Stolper-Samuelson Theorem |
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Definition
| States that free trade will benefit the factor used relatively intensively in the production of the export good (or the abundant factor in the Heckscher-Ohlin model) and hurt the other factor |
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Definition
| Quantity of imports a country gets for each unit of its exports. Measured by taking the ratio of the price of the exportable good to the price of the importable good |
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