One of the Commonly Used Assumptions in Deriving the Heckscher-Ohlin

question 18

Essay

One of the commonly used assumptions in deriving the Heckscher-Ohlin model is that tastes are homothetic, or that if the per capita incomes were the same in two countries, the proportions of their expenditures allocated to each product would be the same as it is in the other country. Imagine that this assumption is false, and that in fact, the tastes in each country are strongly biased in favor of the product in which it has a comparative advantage. How would this affect the relationship between relative factor abundance between the two countries, and the nature (factor-intensity) of the product each exports?
What if the taste bias favored the imported good?

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Definitions:

Presbyopia

Age-related, progressive loss of the eyes’ ability to focus on nearby objects due to loss of elasticity in the lens.

Opaque Areas

Sections or aspects of something that are not transparent or easily understood, often requiring further clarification or investigation.

Cataracts

A medical condition where the lens of the eye becomes progressively opaque, resulting in blurred vision and, if untreated, blindness.

Macular Degeneration

A medical condition that leads to vision loss, specifically in the macula portion of the retina, typically affecting older adults.