Gravity model of trade
The Gravity Model of Trade suggests that the volume of trade between two countries is influenced by their economic size (often measured by GDP) and the distance between them. Just like gravity pulls objects together, larger economies tend to trade more with each other, while distance can hinder trade due to transportation costs and time. This model helps explain why neighboring countries often have strong trade relationships, while distant countries trade less, even if they have similar economies. It essentially blends economic power and geographical factors to predict trade patterns.
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The Gravity Model of Trade is an economic theory that predicts how much trade will occur between two countries based on their economic size and distance apart. Just like gravity pulls objects together, larger economies tend to trade more with each other, while distance can hinder trade. For example, two big countries that are close together will likely trade more than two distant countries, even if they are large. The model suggests that trade volume is directly proportional to the economic size (GDP) of the countries and inversely proportional to the distance separating them.