![What assumptions are made in the theory of international trade for countries to benefit from it? What assumptions are made in the theory of international trade for countries to benefit from it?](https://digitalteachers.co.ug/wp-content/uploads/2022/09/Bbosa-Science.png)
What assumptions are made in the theory of international trade for countries to benefit from it?
The theory of trade is based on the following assumptions
- The amount of labor and capital in two countries differ (difference in endowments)
- Technology is the same among countries (a long-term assumption)
- Assume two countries
- Assume two commodities e.g. cotton and coffee
- Assume labour is the only factor of production
- Assume that supply of labour is constant and fully employed
- Assume perfect mobility of factors of production within the country and immobile between countries
- No transport costs are involved
- Barter trade system exists
- Production of commodities is subject constant costs
CATEGORIES Economics
TAGS Dr. Bbosa Science