Trade under changing conditions

Abstract

This chapter discusses trade under changing conditions. The source of changes in factor endowments or technology affects the level of production and income. This, in turn, will affect expenditure levels and a country's demand for imports and supply of exports. As a result, the terms of trade might change with further repercussions for the level of real income. Decreases in factor endowments and technological capabilities can occur under conditions of famine, disease, and war, but it has become accepted practice to discuss such changes within the context of the former meaning of these terms. Another set of relationships concerns international movements of the various factors of production and technology. It is relatively easy to show that, in principle, trade and factor movements can be considered as substitutes for each other.