# What is Heckscher-Ohlin theory explain with example? ## What is Heckscher-Ohlin theory explain with example?

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.

What are the two factors of production in the Heckscher-Ohlin theory?

Two factors of production, labor and capital, are used to produce clothing and steel. Both labor and capital are homogeneous. Thus there is only one type of labor and one type of capital.

### Which is not the assumption of Ho theory?

Answer» b. there is no perfect competition in both commodity and factor markets. all production functions are hertogenious. production function is subject to increasing or decreasing returns to scale.

What is the source of comparative advantage in the Heckscher Ohlin model?

Factor endowments: the Heckscher-Ohlin theory Simply put, countries with plentiful natural resources will generally have a comparative advantage in products using those resources.

## What is the difference between Heckscher Ohlin and H O model?

The original H–O model assumed that the only difference between countries was the relative abundances of labor and capital. The original Heckscher–Ohlin model contained two countries, and had two commodities that could be produced. Since there are two ( homogeneous) factors of production this model is sometimes called the “2×2×2 model”.

What is the Heckscher Ohlin theory of unemployment?

Unemployment is the vital question in any trade conflict. Heckscher–Ohlin theory excludes unemployment by the very formulation of the model, in which all factors (including labour) are employed in the production. Standard Heckscher–Ohlin theory assumes the same production function for all countries.

### How many countries are in the Heckscher Ohlin model?

The original Heckscher–Ohlin model contained two countries, and had two commodities that could be produced. Since there are two ( homogeneous) factors of production this model is sometimes called the “2×2×2 model”.

Is the Heckscher-Ohlin model divergent?

), especially beyond their own Production–possibility frontier; production and consumption points are divergent. The Heckscher–Ohlin model ( H–O model) is a general equilibrium mathematical model of international trade, developed by Eli Heckscher and Bertil Ohlin at the Stockholm School of Economics.

Categories: FAQ