Trade and General Equilibrium

Leonard Gomes
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Leonard Gomes: Middlesex Polytechnic

Chapter 7 in Neoclassical International Economics, 1990, pp 102-142 from Palgrave Macmillan

Abstract: Abstract The transformation curve (or concave production-possibility frontier) was introduced into trade theory by Enrico Barone in 1908, but for various reasons his contribution went unnoticed. Twenty-two years later, Haberler reintroduced the construction under the label of ‘production substitution curve’. It was a diagrammatic representation of a country’s maximum attainable set of outputs for two commodities from a given supply of productive factors, and described the rate at which commodities could be substituted for each other not only under constant opportunity-cost conditions, but also under increasing and decreasing casts as well.1 Under increasing costs (the assumption frequently made) the production-possibility frontier is drawn strictly concave to the origin, i.e. the production possibility set is convex, reflecting the law of diminishing marginal productivity.

Keywords: General Equilibrium; Trade Policy; Commodity Price; Imperfect Competition; Factor Endowment (search for similar items in EconPapers)
Date: 1990
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DOI: 10.1057/9780230371552_7

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