1.

Examine the Terms of Trade

The terms of trade are defined as the quantity of one good that exchanges for a
quantity of another
Terms of trade (TOT) represent the ratio between a country's export prices and its
import prices. How many units of exports are required to purchase a single unit of
imports? The ratio is calculated by dividing the price of the exports by the price of
the imports and multiplying the result by 100.

 Terms of trade (TOT) is a key economic metric of a company's health

measured through what it imports and exports.
 TOT is expressed as a ratio that reflects the number of units of exports that
are needed to buy a single unit of imports.
 TOT is determined by dividing the price of the exports by the price of the
imports and multiplying the number by 100.
 A TOT over 100% or that shows improvement over time can be a positive
economic indicator as it can mean that export prices have risen as import
prices have held steady or declined

2. Solve the terms of trade between two goods is equivalent to the ratio of dollar prices
for the two goods.

Overview of Factor Mobility

Factor mobility refers to the ability to transfer factors of production—labor, resources,
or land—from one production process to another. Factor mobility can entail the
movement of factors between companies within the industry, as when one steel plant
closes but sells its production equipment to another steel firm.
 Land
The land is any natural resource that's needed or used in the production of
a good or service. Land can also include any resource that comes from
the land such as oil, gas, and other commodities such as copper and
silver. Typically, land includes any natural resource that's used as raw
materials in the production process.

 Labor
Labor consists of the people that are responsible for the production of a
good, including factory workers, managers, salespeople, and the
engineers that designed the machinery used in production

 Capital
Capital refers to capital goods such as manufacturing plants, machinery,
tools, or any equipment used in the production process. Capital might
refer to a fleet of trucks or forklifts as well as heavy machinery.

1. Domestic Factor Mobility

Domestic factor mobility refers to the ease with which productive factors
such as labor, capital, property, natural resources and so on can be
reallocated across sectors of the domestic economy. Different degrees of
mobility occur when there are different costs associated with shifting
variables between industries.

2. Time and Factor Mobility

The degree of mobility of variables through industries is significantly influenced

by the passage of the time. As time passes, the most mobile factors begin to find
employment in other industries.
In the long run, all factors are mobile at some cost. For workers, complete
mobility may require the passing of a generation out of the workforce. For capital,
complete mobility requires depreciation of the unproductive capital stock,
followed by new investment in profitable capital.

3. Immobile Factor Model Overview and Assumptions Overview

 The immobile factor model highlights the effects of factor immobility between
industries within a country when a country moves to free trade.
This implies that labor, the only factor, remains stuck in its original
industry as the country moves from autarky to free trade.

Factors of production are potentially mobile in three distinct ways:

 Between firms within the same industry

 Between industries within the same country

 Between firms or industries across countries