Chapter 8, Problem 5P

To determine

Which good will china, US, export according to Heckscher-Ohlin model and what will happen to the price of labor.

Concept Introduction:

Heckscher-Ohlin Model: The Heckscher-Ohlin Model states that a country exports the goods which are produced with the use of factors that are abundantly available within the country and imports the goods which are produced with the use of factors that are scarce in the country.

Comparative Advantage: The comparative advantage theory of international trade states that a country shall have a comparative advantage over the production of a good or service if its opportunity cost is lower as compared to another country.