In a Heckscher-Ohlin context, will the gains from trade be larger or smaller if one of the...


In a Heckscher-Ohlin context, will the gains from trade be larger or smaller if one of the factors of production is not mobile between sectors? Demonstrate this graphically. Is it true that if neither factor is mobile, the country will receive no gains from trade? Explain.

Gains from trade

Gains from trade are really the net benefits that economic agents receive as a result of being allowed to engage in more voluntary trading with one another. Reduced tariffs or other trade liberalization gaining customer surplus and furthermore producer surplus, to use technical terms.

Answer and Explanation: 1

A few of the key factors that affect the gains from global trade are as follows:

1) Differences in Cost Ratios

Reciprocal Supply and Request

3) Level of Income

4) Terms of Trade

5) Productivity Efficiency

6) The Type of Products Exported

7) conditions of the technological kind

8) Country's Population Size

Specialization, division of labour, increased market size, low unit costs, and mass production enabled by trade and innovative thinking and discovery of new production techniques and equipment are the major sources of profit from the trade.

Domestic factor mobility is the ease with which productive factors such as labour, capital, property, natural resources, etc., can be redistributed across sectors in and around the domestic economy.

And since moving factors between industries have different costs, there are various levels of mobility.

The benefits of international trade are highly variable. The output is dependent on a slew of factors. Inputs like labour, machinery, materials, and infrastructure are combined to form these factors.

Every single input is interconnected. A non-mobile factor will have an effect on the output and cause production to fall.

It's not true that if neither factor moves, the country loses. If one of the factors is immobile, the trade's profits will suffer, but that doesn't mean no profits will be made.

Learn more about this topic:

Mobile Devices: Examples, Impact & Trends


Chapter 2 / Lesson 4

We use more mobile devices in today's society than ever before. This lesson will explain what a mobile device is, some of the most common devices we use daily, and how the world of mobile ties into the Internet of Things.

Related to this Question

Explore our homework questions and answers library