New Trade Theory Flashcards
What is the main idea in this model?
Trade is driven by economies of scale, product differentiation, and imperfect competition
What are the production factors in this model?
Labor, capital and economies of scale in production
How is the PPC in this model?
Bowed, affected by economies of scale and product variety
What gains are these from trade according to this model?
Increased consumer variety and lower costs due to economies of scale
Are there any income distribution effects in this model?
Yes, often concentrating profits in certain firms or regions
What trade patterns are explained in this model?
Trade between similar countries and within the same industry ( intra-industry trade= import and export of the same type of goods ex cars)
When is this model used?
To understand modern trade patterns, such as intra-industry trade and globalization effects
Give and example of this model
Germany and Japan trade cars with each other despite similar resources and technology
What are the key assumptions in this model?
Imperfect competition, economies of scale, and consumer preference for variety
