New Teaching Practice: Using the Edgeworth Box Diagram in the Two-Factor Neo-classical Model

The two-factor model of international trade theory analyses the advantages of international trade and their substance which results in two-factor utilization labour and capital. The inventors of this theory came to the conclusion that international trade was good for the individual economies involved, and that it had positive consequences for world economy as well. To explain this theory we can use two approaches through Possibility Production Frontier curves (Heckscher-Ohlin model) or through Edgeworth-box-diagram (factor-price equalization model). The second one is more comprehensive and conclusive because it includes a conception of factor production inputs (PPF curves) and a conception of production output and utilization (IC curves) as well. At the same time, understanding this also requires very good knowledge of microeconomics and their economic connections not only on the part of pedagogues but especially on the part of students. For this reason international trade theory is often taught in international economics lessons. Its omission does not reduce this subject's quality in MA studies but for the postgraduate level it is indispensable.