Question

The Heckscher–Ohlin Model assumes that: a) consumer tastes within each country have no effect on international trade. b) consumer tastes are the same in the two countries and invariant with respect to income. c) consumer tastes are different in the two countries and have no effect on international trade. d) consumer tastes are different in the two countries and invariant with respect to income.

Answer 1

Answer:

B). Consumer tastes are the same in the two countries and invariant with respect to income.

Explanation:

As per the given question, the Heckscher- Ohlin model exemplifies an economic theory that unrealistically assumes that consumer tastes are similar in two countries and invariant with respect to income. Such an unrealistic assumption is proposed in this theory to divert the focus towards other elements that contribute to affecting the trade and prices as the chief aim is to evaluate and analyze trade and it's equilibrium in two countries. Thus, option B correctly asserts the assumption of the Heckscher–Ohlin Model.