Introduction Countries engage in international trade for two basic reasons They are different from each other in terms of climate, land, capital, labor, and technology They try to achieve scale economies in production The Ricardian model is based on technological differences across countries These technological differences are reflected in differences in the productivity of labor Copyright C 2003 Pearson Education, Inc Slide 1-3Copyright © 2003 Pearson Education, Inc. Slide 1-3 ▪ Countries engage in international trade for two basic reasons: • They are different from each other in terms of climate, land, capital, labor, and technology. • They try to achieve scale economies in production. ▪ The Ricardian model is based on technological differences across countries. • These technological differences are reflected in differences in the productivity of labor. Introduction