Abstract
The 2 ×2 ×2 (2 countries, 2 commodities, 2 factors) model is a general equilibrium model that explains international trade as the result of excess demand for a commodity (say, commodity A) in a country (say, country 1) matched by an excess supply of the other commodity (commodity B) in the other country (country 2). Owing to Walras’ law, there will be an excess supply of commodity B in country 1, matched by an excess demand in country 2. This model is explained from scratch, starting from a closed economy.
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Gandolfo, G. (2014). The Neoclassical Theory of International Trade. In: International Trade Theory and Policy. Springer Texts in Business and Economics. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-37314-5_3
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DOI: https://doi.org/10.1007/978-3-642-37314-5_3
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