Question

Explain how the H-O theory can be used to explain the pattern of trade between two countries.​

Answer 1

Answer: See explanation

Explanation:

The Heckscher-Ohlin model refers to an economic theory which states that countries will export the goods that they can produce efficiently and in large quantities while they'll import those that they are less efficient in producing.

According to the H-O theorem, the pattern of trade that exists between countries as a result of the characteristics that are possessed by the countries. In such case, a capital-abundant country can produce a capital intensive good efficiently and therefore should export the capital intensive good. Likewise, a labor-abundant country can produce labor intensive good efficiently and therefore should export the labor-intensive good.