The Neoclassical Theory of International Trade

Giancarlo Gandolfo

Chapter Chapter 3 in International Trade Theory and Policy, 2014, pp 33-62 from Springer

Abstract: Abstract The 2 ×2 ×2 (2 countries, 2 commodities, 2 factors) model is a general equilibrium model that explains international trade as the result of excess demand for a commodity (say, commodity A) in a country (say, country 1) matched by an excess supply of the other commodity (commodity B) in the other country (country 2). Owing to Walras’ law, there will be an excess supply of commodity B in country 1, matched by an excess demand in country 2. This model is explained from scratch, starting from a closed economy.

Keywords: International Trade; Relative Price; Demand Curve; Marginal Rate; Excess Demand (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sptchp:978-3-642-37314-5_3

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DOI: 10.1007/978-3-642-37314-5_3

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