The Heckscher-Ohlin theory argues that, in addition, trade also occurs due to ...?
differences in the availability of labor, labor skills, physical capital, capital, or other factors of production across countries, and differences in the needs for the various resources across industries
In the Two Factor Heckscher-Ohlin Model there are..?
two countries(home and foreign) -2 goods(ie.food and cloth) - 2 factors of production(labor and capital)
What are the 2 factors of production in the Heckscher-Ohlin Model?
labor and capital
in the 2 factor Heckscher-Ohlin Model, consumer preferences are...?
identical for all individuals
The Heckscher-Ohlin model predicts that relative output prices and factor prices will ...?
equalize, neither of which occurs in the real world.
In competitive markets, the price of a good should equal its cost of production, which depends on...?
the factor prices
what is the Stolper - Samuelson theorem?
if the relative price of a good increases, then the real wage or rental rate of the factor used intensively in the production of the good increases, while the other factor decreases (also says any change in the relative price of goods alters the distribution of income)
if you hold output prices constant...as the amount of a factor of production inccreases, then the supply of the good that uses this factor intensively increases and the supply of the other good decreases
Assume an economy's labor force grows, which implies that is...?
ratio of labor to capital L/K increases
When looking at trade in the Heckscher-Ohlin Model, the countries are assumed to have the same...?
technology and the same tastes
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