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The Product Life Cycle Theory is an economic theory that was developed by Raymond Vernon in response to the failure of the Heckscher–Ohlin model to explain the observed pattern of international trade. The theory suggests that early in a product's life-cycle all the parts and labor associated with that product come from the area where it was ...
International trade theory is a sub-field of economics which analyzes the patterns of international trade, its origins, and its welfare implications. International trade policy has been highly controversial since the 18th century. International trade theory and economics itself have developed as means to evaluate the effects of trade policies.
The economic theory of international trade differs from the remainder of economic theory mainly because of the comparatively limited international mobility of the capital and labour. [6] In that respect, it would appear to differ in degree rather than in principle from the trade between remote regions in one country.
International trade is, in principle, not different from domestic trade as the motivation and the behavior of parties involved in a trade do not change fundamentally regardless of whether trade is across a border or not. However, in practical terms, carrying out trade at an international level is typically a more complex process than domestic ...
New trade theory and "new" new trade theory (NNTT) need their own trade theory. New trade theories are often based on assumptions such as monopolistic competition and increasing returns to scale. One of the typical explanations, given by Paul Krugman, depends on the assumption that all firms are symmetrical, meaning that they all have the same ...
Location theory addresses the questions of what economic activities are located where and why. Location theory rests — like microeconomic theory generally — on the assumption that agents act in their own self-interest. Thus firms choose locations that maximize their profits and individuals choose locations, that maximize their utility.
The key for the theory is the rate of diffusion of technology. Moving on to 1966, Vernon further extended the technology gap model into the product life-cycle theory. [2] The degree of maturity of the technology became the new key of the dynamic economic trade. Vernon's theory resonances with the technology gap theory.
Linder proposed an alternative theory of trade that was consistent with Leontief's findings. The Linder hypothesis presents a demand based theory of trade in contrast to the usual supply based theories involving factor endowments. Linder hypothesized that nations with similar demands would develop similar industries.