International Economics I Assignment (30%)

1. The Classical Trade Theories (group one)

 Explain the basic ideas of Adam Smith’s absolute cost advantage theory of international
and David Ricardo’s Comparative Advantage theory of international trade; compare the
similarities and basic differences of the two models of international trade theories.
 Show how terms of trade between trading countries are determined by demand and supply
forces as stated by John Stuart Mill’s theory of Reciprocal Demand using the offer curve
analysis
 Explain the factors that cause changes in terms of trade between countries.
 Critically evaluate the validity of the classical theories of international trade to the real
world trade relations between countries.
2. The Neoclassical Trade Theory (group two)
 Explain the basic ideas of the Heckscher-Ohlin (H-O) Theorem
 Analyze how the H-O theory examines the basis for comparative advantage and the effect
that trade has on factor earnings in the nation
 Criticize H-O Theorem using lines of arguments
 Critically evaluate H-O Theorem of international trade

N.B

 Refer your handout (chapter two)

 Cover at least each point or question but better if you incorporate additional points.