THE FOUR MAJOR THEOREMS OF HECKSCHER-OHLIN THEORY 1. Lemma: Factor Price Insensitivity So long as both goods are produced and factor intensity reversals
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چکیده
So long as both goods are produced and factor intensity reversals do not occur, each price vector (pX , pY ) corresponds to a unique factor price vector. This should be pretty obvious from both the Woodland-Mussa and the Lerner-Pearce diagram. With the same technology and given prices, there is a unique intersection between the zero profit lines in the Woodland-Mussa diagram. Similarly, for given unit revenue lines in the Lerner-Pearce diagram, there is only one unit cost line that can have a tangency with both. What do the two conditions mean, what happens if they are not fulfilled?
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