ECO 340 Lecture Notes - Lecture 2: Factor Endowment, Autarky, Opportunity Cost
Document Summary
The article is based on the israeli palestine situation. Connect the model to a trade model that you have learned in class so far. Set up the trade model well, labeling everything properly. Based on stated situations in the article: identify at least one trade model you have learned. Identifying more than one will enhance your earned points. The first trade model i will be identifying is the hecksher-ohlin trade model, also known as the factor endowment theory. The main idea of this theory states that the basis for trade is differences in relative autarky prices of trading nations. Nations will export products using the highest amount of their relatively abundant resource and import products using their relatively scarce resource, according to this theory. Basically, countries export what they can most efficiently and abundantly produce. The capital-to-resource labor ratio is an important tool in the calculations and planning in using this model.
