The document discusses the Heckscher-Ohlin theory of international trade. It states that countries will export goods that make intensive use of factors of production that are locally abundant, and import goods that make intensive use of factors that are locally scarce. The theory was developed by Eli Heckscher and Bertil Ohlin, Swedish economists, and is based on the idea that a country's factor endowments influence its comparative production costs and therefore its trade patterns. The document provides an example of two countries, one relatively capital-abundant and the other relatively labor-abundant, exporting goods in line with their abundant factors.

2. MODERN THEORY OF INTERNATIONAL
TRADE.
H-O THEORY.
FACTOR PROPORTIONS THEORY.
FACTOR ENDOWMENTS THEORY.
H-O MODEL.

3. ELI HECKSHER-he was SWEDISH economist
(1879-1952)
BERTIL OHLIN-he was SWEDISH economist
(1899-1979)and politician and in 1977 he shared
the NODLE prize for economics with JAMES
MEADE.
HECKSCHER and OHLIN predict that countries will
Export goods that make intensive use of locally
abundant factors.
Import goods that make intensive use of factors that are
locally scarce.

4. ELI HEKSCHER AND BERTIL OHLIN
 developed a new theory
 based on the comparative cost advantages theory
They did not ignore the comparative cost difference

5. A COUNTRY WILL EXPORT GOODS THAT
ARE INTENSIVE IN ITS RELATIVELY
ABUNDANT FACTOR AND WILL IMPORT
GOODS THAT ARE INTENSIVE IN ITS
RELATIVELY SCARCE FACTOR.
RELATIVE FACTOR ENDOWMENTS.

6. o TWO COUNTRIES (HOME AND FOREIGN)
o TWO GOODS (COMPUTER AND SHOES)
o TWO FACTORS OF PRODUCTION
(LOBOUR,CAPILAL)
o COUNTRIES WHICH ARE RELATIVELY
CAPITAL INTENSIVE WILL EXPORT CAPITAL-
INTENSIVE GOODS.

7. o COUNTRIES WHICH ARE RELATIVELY LOBOR
INTENSIVE WILL EXPORT LOBOR-INTENSIVE
GOODS.
o FACTORS CAN MOVE ACROSS INDUSTRIES, BUT
NOT COUNTRIES
o CONSUMER TASTES IDENTIAL ACROSS
COUNTRIES
o DO NOT VARY WITH LEVEL OF INCOME

8. o IDENTIAL TECHNOLOGIES
o FINAL OUTPUT ARE TRADED FREELY
1TWO COUNTRIES:A AND B
2TWO GOODS :X AND Y
3TWO FACTORS OF
PRODUCTION(LABOUR,CAPITAL)

9. KA/LA > KB/LB
A IS THE CAPITAL ABUNDANT
COUNTRY
LA/KA<LB/KB
B IS THE LABOR ABUNDANT
COUNTRY

10. KX/LX > KY/LY
X IS THE CAPITAL INTENSIVE
GOOD
LX/KX < LY/KY
Y IS THE LOBOR INTENSIVE
GOOD

11. 60%
30%
10%
60%LAND
30%CAPITAL
10%LABOUR

12. 35%
23%
42% 35%LAND
23%CAPITAL
42%LOBOUR