ECONOMICS
DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Gains from trade
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Effect of trade on production and consumption
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Effect of trade on the incomes of production factors
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All of the above
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Detailed explanation-1: -The Heckscher-Ohlin model evaluates the equilibrium of trade between two countries that have varying specialties and natural resources. The model explains how a nation should operate and trade when resources are imbalanced throughout the world.
Detailed explanation-2: -The Heckscher-Ohlin theorem states that if two countries produce two goods and use two factors of production (say, labour and capital) to produce these goods, each will export the good that makes the most use of the factor that is most abundant.
Detailed explanation-3: -Heckscher and Ohlin explain that international trade is due to the differences in factor-endowments (i.e. differences in supplies of all factors and not only of labour efficiency) and different factor-proportions required for different commodities.
Detailed explanation-4: -Factor Price Equalization Theorem, Stolper-Samuelson Theorem, Rybczynski Theorem, and. Heckscher-Ohlin Trade Theorem.