# Very basic: constant in gravity-model of trade

## Main Question or Discussion Point

Very basic: "constant" in gravity-model of trade

The gravity model of trade states that trade between countries depends on the size of their economies (bigger = more trade) and distance between them (larger = less trade).

The formula is: Trade = G ((Mi*Mj)/(Distance))

Mi is size of economy i, and Mj is size of economy j, and G is a "constant". I am seeing this term, "constant" used more and more in Economics. Can someone tell me what exactly it means, especially in a formula like this?

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## Answers and Replies

tiny-tim
Homework Helper
hi 939!
… I am seeing this term, "constant" used more and more in Economics. Can someone tell me what exactly it means, especially in a formula like this?
"constant" means that we use the same value of G in all cases

it doesn't matter which two countries it is, or how far apart they are …

the same formula always works, with the same value of G

1 person
hi 939!

"constant" means that we use the same value of G in all cases

it doesn't matter which two countries it is, or how far apart they are …

the same formula always works, with the same value of G
Thanks.

The only thing I don't get is why bother even putting G there? If there's two answers from the calculation, 3/2 and 1/2, they'll have the same ratio regardless of what constant G is, no?? In that sense you could just leave out the G all together :-/

tiny-tim
Homework Helper
If there's two answers from the calculation, 3/2 and 1/2, they'll have the same ratio r…
i don't understand

can you give an example?​

1 person
Nugatory
Mentor
Thanks.

The only thing I don't get is why bother even putting G there? If there's two answers from the calculation, 3/2 and 1/2, they'll have the same ratio regardless of what constant G is, no?? In that sense you could just leave out the G all together :-/
You can, but we might be interested in the numerical value of the trade instead of just how it compares with the trade between two other economies. Of course if I know the value of the trade between one pair of economies of known size and separation, I can use the ratios to work out the value for any other pair - but that's basically equivalent to calculating the value of G.

1 person
SteamKing
Staff Emeritus