Foreıgn Trade Deneme Sınavı Sorusu #1392029
Magnification effect implies that:
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A change in the wage leads to a relatively more change on the demand for labor in the same direction. |
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A change in the demand for a labor-intensive commodity leads to a relatively more change on the price of the commodity in the same direction. |
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A change in the price of a commodity leads to a relatively more change on the income of the factor used intensively in its production in the same direction. |
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A change in the demand for a capital-intensive commodity leads to relatively more change on demand for capital in the same direction. |
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The amount of output increase will be relatively higher than the increase in the factors of production. |
Although the assumptions of the Stolper Samuelson Theorem seem logical, it constitutes the initial stage in explaining the distribution of income effects of international trade. The Theorem can be extended by taking into consideration the magnification effect. According to the magnification effect, an increase or a decrease in the price of a commodity has a greater effect in the same direction on the income of the factor used intensively in its production.
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