BUS Unit 4 Individual project - Research Paper Example

In addition to these factors, aspect that makes the Ohlin’s theory superior over the classical presentation is the fact that it measures the comparative advantage in terms of money (Davis, 1995). This is in contrast to the classical’s proposition that asserts the role of labor and received immense criticism for non-clarity. Ohlin’s explanation for the price differences in international trade accounts the supply factors in detail as compared to Ricardian’s only labor efficiency endowment.

Hence for the economics and economist’s prosperity, Ohlin contributed with identification of factors that lead to the international trade than Ricardian’s typical classical approach of welfare proponent (Van Marrewijk, 2012). Another point that makes the Ohlin’s work mention worth is the explanation of the income distribution among partners. Ohlin asserts the role of factors of production in distribution of income among trading partners. The international trading cost is higher than the cost of domestic trading, because it includes tariffs, time costs, legalities and restrictions.

All these costs in addition to factors of production eventually affect the evenness in the income of partners in international trade. . d required that the factors of production that are considered in the international trade are needed to be much more specifically and narrowly defined when testing the endowment factor theory. For example there are different kinds of land (arable, urban, and unusable for any production). Different forms of capital are there as well. Therefore, more categorized form of factors of production being land, labor, capital and entrepreneur is important to understand the essence of role and impact of international trade.

International trade continued to be the factor of debate. Staffan Linder, economist later, supported the concept of Leontief and added another dimension to it. In the view of Staffan Linder international trade has different explanation for manufacturer and agriculture. Staffan viewed the factor endowment theory working for primary (agriculture) goods but the debated on the explanation to be effective for manufacturing goods. In his view the international trade of manufacturing goods does not depends on excess amount of labor and capital in the country, but actually it is driven by the demand at the domestic level and factor endowment at national level has little contribution.

If the other countries do not demand for the excess production that is been undertaken in the supplier’s country then the production will be useless. ANSWER TO THE QUESTION FROM AUDIENCE SPECIFIC TARIFF It is an amount of money that does not vary with the price of good. The market conditions or inflation do not impact on specific tariffs. Specific tariff only changes periodically (Krugman, 2008). ADVANTAGES DISADVANTAGES The rising prices of goods in the international market do not impact the cost.

Consumer prices are only increased by the level of other factors. This controls the