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Economics : key information

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As an international economist you have been asked to prepare a short speech which answers the following questions:

Instructor Comments:

The best papers are able to convey the core ideas of these theories in concise statements. For the discussion of the Ricardian model, and the Heckscher-Ohlin Model, first explain the models in simple terms, then add any complexity needed to be thorough. Both of these theories were developed to explain trade patterns. For the Ricardian theory, explain key concepts such as opportunity costs, specialization, gains from trade, and comparative advantage ; and then how they are linked. For the H-O model, explain how it extends the Ricardian model, ie, how does it explain which country might have a comparative advantage in a particular area? Hint: The key is factor endowments.

Answer the rest of the questions one at a time.

1. How does the Heckscher-Ohlin theory differ from Ricardian theory in explaining international trade patterns?

2. The Heckscher-Ohlin theory demonstrates how trade affects the distribution of income within trading partners. Explain.

3. How does the Leontief paradox challenge the overall applicability of the factor-endowment model?

4. According to Staffan Linder, there are two explanations of international trade patterns - one for manufacturers and another for primary (agricultural) goods. Explain.

Following that speech, the audience asks you to respond to the following question:

Describe a specific tariff, an ad valorem tariff, and a compound tariff. What are the advantages and disadvantages of each?

Write the text of your speech and your response to the question as a Word document, including APA citations for all sources you use.

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Solution Summary

The response addresses the queries posted in 454 words with references.

Solution Preview

The response addresses the queries posted in 454 words with references.

// This paper focuses on answering various questions relating to Heckscher-Ohlin theory like the difference between Heckscher-Ohlin theory and Ricardian theory, how Heckscher-Ohlin theory demonstrates that trade affects the distribution of income within trading partners, how the Leontief paradox challenges the overall applicability of the factor-endowment model etc.//.

Ricardian model of international trade states the difference in the comparative advantage that results from the technological difference between the two nations engaged in international business. On the other hand, Heckscher-Ohlin Model is developed from the Ricardian model of international trade and states that the trade patterns are a result of the natural ability of the different factors of production like machinery, money, method and manpower (Heckscher-Ohlin Model Overview, n.d.)

There is a difference between the theories provided by both the Ricardian model and the Heckscher-Ohlin Model. The theory Heckscher-Ohlin says that the country which has an abundance of capital will engage itself in the exportation of capital intensive goods, and the country where labor is abundant will engage in the exportation of labor intensive products, which means that countries export those goods for which they possess better production capability (Heckscher-Ohlin Model Overview, n.d.). Whereas, the Ricardian theory says that the goods are produced from single factor of ...

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  • MBA (IP), International Center for Internationa Business
  • BBA, University of Rajasthan
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