International Trade and Economic Theories

These flashcards cover key concepts related to international trade, economic theories, and their implications on income distribution, protectionism, and the benefits of trade.

Comparative Advantage

The principle that a country can gain by specializing in the production of goods in which it has a lower opportunity cost.

Opportunity Cost

What you give up to produce or consume something else; it reflects the potential benefits lost when choosing one alternative over another.

David Ricardo's Model

A model that explains how countries can benefit from trade by specializing in goods where they have a comparative advantage.

Trade Barriers

Government-imposed restrictions like tariffs and quotas that affect trade patterns, sometimes protecting domestic industries.

Heckscher-Ohlin Model

A theory predicting that countries will export goods that utilize their abundant factors of production and import goods that utilize their scarce factors.

Specific Factors Model

A trade model that analyzes how income distribution is affected by international trade, considering both mobile and specific factors of production.

Income Distribution

The manner in which income is allocated within a population, often analyzed in terms of winners and losers under trade policies.

Trade Wars

Economic conflicts in which countries impose tariffs or other trade barriers against each other in an attempt to protect their domestic industries.

Economic Growth

An increase in the production of goods and services in an economy, often influencing trade patterns and comparative advantages.

Import-Substituting Industrialization (ISI)

A strategy that encourages domestic production by restricting imports to develop local industries.

Stolper-Samuelson Theorem

A theory suggesting that trade can lead to increased income inequality by benefiting specific factors of production while harming others.

Learning Curve

A concept that describes how the cumulative experience in production lowers costs, giving an advantage to early movers in an industry.

Terms of Trade

The ratio at which one country's goods trade for those of another country; an increase in terms of trade can imply an increase in national welfare.

Transportation Costs

The expenses associated with moving goods from one location to another, which can influence trade patterns and viability.

Protectionism

Economic policy of restricting imports to protect domestic industries from foreign competition.

Economies of Scale

Cost advantages that firms obtain due to the scale of operation, with cost per unit of output generally decreasing with increasing scale.