W4 - Heckscher-Ohlin Model

Heckscher Ohlin model argues for

a ealistic view of trade must allow for differences in factors of production such as land, capital, and natural resources

relative factor abundance

what countries have alot of

relative factor insensity

what goods use intensivley

what influences comparitive advantage

relative factor abundance and intensity

a good that requires 4 units of labour and 2 units of capital is

labour intensive

a country that has 200 labour and 300 capital is

capital abundant

aKC

unit of capital used to produce one unit of cloth

aLF

unit of labour used to produce one unit of food

how might inputs to production differ (give example)

countries can choose combination depending on endowments or intensity e.g. 1 machine vs 10 workers

capital to labour intensity ratio

aKF/aLF

how might model influence specialisation

country moves toward specialization in the good that uses its abundant factor

amount of labour hours or machines used cannot exceed

machine or labour supply

express the following formulaically: amount of labour hours or machines used cannot exceed machine or labour supply

aKC x Qc + aKF x Qc > K

aLC X Qc + aLF x Qc > L

Which is capital and labour intensive based on this calculation (second term should say aKC/aLC)

food capital intensive

cloth labour intensive

HO y and x axes

quantity of cloth and food

what curves included in HO graph and what do they show

labour constraint and capital constraint and PPF

PPF is intersection

combinations at which labour and capital is exhausted

input mix depends on

costs of production and abundance

draw a graph showing how trade might cause specialisation in HO model