Question

we are in a two good, two country world, where all of the assumptions of the heckscher-ohlin model of trade are satisfied. suppose that in japan there are 50 workers and 50 acres of land, while in the U.S. there are 100 workers and 200 cres of land. suppose furthermore that the two goods, rice and cloth are prouced using land and labor. rice is land intensive. suppose the two countries open up to trade. what will be the pattern of trade?

Answer 1

Answer: The answer is as follows:

Explanation:

From the given information,

Japan:

There are 50 workers and 50 acres of land

so,

Worker-land ratio = $\frac{number\ of\ workers}{acres\ of\ land}$

= $\frac{50}{50}$

= 1

Land-Worker ratio =$\frac{acres\ of\ land}{number\ of\ workers}$

= $\frac{50}{50}$

= 1

US:

There are 100 workers and 200 acres of land

so,

Worker-land ratio =  $\frac{number\ of\ workers}{acres\ of\ land}$

= $\frac{100}{200}$

= 0.5

Land-Worker ratio =$\frac{acres\ of\ land}{number\ of\ workers}$

= $\frac{200}{100}$

= 2

From the above calculations of worker to land ratio and land to worker ratio of these two countries.

We conclude that Land-worker ratio in US is greater than that in Japan. So, US is land abundant country. Whereas Worker-land ratio in Japan is greater than that in US. So, Japan is Worker abundant country.

According to the H-O theory, a country exports the commodity whose production requires the intensive use of the country's relatively abundant factor.

It was given that rice is land intensive means that its production requires more of land than worker.

Once countries opens up the trade then,

US exports rice whose production requires the intensive use of land that is the country's relatively abundant factor. On the other hand, Japan exports cloth whose production requires the intensive use of worker that is the country's relatively abundant factor.