Question

In the context of the specific factor model explain how relative resource endowments lead to comparative advantage and the possibility of mutually beneficial trade between countries ?

Answer 1

Specific factor model is based on different types resources and their mobility . Land and capital both are fixed factor of production ,while labor or skilled labor is variable factor of production some country may posses land capital but they don't possess enough numbers of skilled labor and thus this may gave other countries to take comparative advantage of skilled labor bas their production become more effective efficient by using same amount of resources .

This model is all about how much one country posses resources availability or specific resources availability with other factor as above also consideration make that country comparatively advantageous than other, while other coin become comparative more advantage in other good making by use of specific need . In this way country cooperate each other mutually and Fullffill desire or need of each other by taking comparative advantage or mutual beneficial trade advantage.