(A) in a 2x2x2 Context, State the Heckscher-Ohlin Theorem

question 25

Essay

(a) In a 2x2x2 context, state the Heckscher-Ohlin theorem. Then indicate how this theorem can be obtained, utilizing the physical definition of relative factor abundance.
(b) When a country enters into trade in accordance with the Heckscher-Ohlin theorem, what happens to the real income of the country's relatively abundant factor of production and what happens to the real income of the country's relatively scarce factor of production? Carefully explain.

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