Question

TRUE/FALSE/UNCERTAIN?

According to the Heckscher-Ohlin model, an increase in the amount of labour lowers the return to labour and raises the return to capital.

Answer 1

Ans. According to the Heckscher-Ohlin model, an increase in the amount of labour lowers the return to labour and rise the return to capital is TRUE.

The Heckscher-Ohlim model is one of the most important models of international trade. It expands upon the Ricardian model largely by introducing a second factor of production. In its two-by-two-by-two variant, meaning two goods, two factors, and two countries, it represents one of the simplest general equilibrium models that allows for interactions across factor markets, goods market, and national market simultaneously. These interactions across markets are one of the important economics lessions displayed in the results of this model. With the H-O model. we learn how changes in supply or demand in one market can feed their way through the factor market and, with trade, the national market and influence both goods and factor markets at home and abroad. In other words, all markets are everywhere interconnected.