Question

Q.1: State and explain the concepts of factor abundance and factor intensity. (2 points)

Factor abundance is a bilateral concept in factor proportions trade theory that has no definition when there are many countries and various factors of production. The present paper proposes a general definition, the Euclidean distance to the intersection of abundance rays with unit hyperplanes. Distance factor abundance is compared with other measures using a data set from the literature.

Q. 2: Using the concepts above, state the Heckscher-Ohlin Theorem and explain its meaning in realistic terms. (2 points)

Q. 3: How is Heckscher-Ohlin Theorem different from Ricardian argument for international trade? (3 points)

Q. 4: State and explain the meaning of three assumptions that are needed to make Heckscher-Ohlin Theorem and are different from Ricardian Theory of Comparative Advantage. (3 points)