Question

4) Why the Heckscher-Ohlin model predicts that prices of factors of production will be equalized due to free trade? But why this prediction fails in the real world? (8 points)

Answer 1

Solutions in the hecksher-thun model, there are two two components of Creation that have been unuzed as the east products for example work and capital. The capital here alludes to physical apparatus and hardware utilized for creation Another presumption of this model is that there is private responsibility for capital. So the proprietor of the capital will procure leause aus is depicated by the model and the work/ taborers will win compensation Moving to the given inaury, it. identifics what as with a significant hypothesis that has been gotten from the nadmal model.

Also, that is factor-value leveung. This pothesis expresses that time the costs of the factor of creation will be evened out between the nations after the costs of the viold pood acts have been balanced between entions. What's more, this wonders happens. in the organized commerce. in straightforward words, it expresses that the sents earned by the propsictor of the capital and wages of the wook will be a -equivalent all through the globe in the organized Commerce system. V The model additionally expect that, Nations share a similar innovation and have a flawlessly serious market. No umitations on exchange the type of taxes and quantities. >No vehical costs the creation capacity of the exchanging nations is the equivalent and of a similar sat

for example either work escalated for capital - Concentrated Distinctive preference for the wars is additionaly the equivalent over the world Full-wook of the factor of creation Negligible physical result of eauch facts es decreasing The facts supplies is fixed between the nations → This hypothesis vigorously subjects to these suppositions. For instance, the wages - In the flawlessly serious market, the arrival to work bring is reliant upon the estimation of its minimal efficency. Thus the peripheral profitability of work reues upon the measure of work just as the capital. On the off chance that the measure of Work being utilized a scents in the business, the MP falls. In any case, on the off chance that the measure of capital ou scents, at that point the labor's Mp gets expended as Well.

this worth is likewise imported by the yield cost of the product existing in the market. On account of a shut ceonomy, the variables of creation of various nations will vary from one another as the yield costs of the products will be extraordinary. For instance, we have two nations, an A and B and they have marked the organi -73ed commerce arrangement- At that point the yield costs of the pood -ucts will get equivalent between the two nations As they will have a similar state of negigable profitability thas, thusly, will empower just one lot of wages and lease esteems that will have the option to fulfill the exchange among A and B for the giren yield merchandise and their costs. Equivalent work and capital will likewise make the two nations produce products chiusing a similar capital - wolk proportion... This CLR is diverse on account of autarky.

Certifiable Applicabiuty! in any case, this model and helpothe -sis are not totally relevant to in reality economy and the suppositions of the said hypothesis are not followed in the genuine situation. Accordingly , complete Factor -value leveling doesn't happen.