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( a ) Consider a standard Heckscher - Ohlin ( HO ) Model, where two countries Home and Foreign produce two goods, sugar and milk,
a Consider a standard HeckscherOhlin HO Model, where two countries Home and Foreign produce two goods, sugar and milk, using labour
L and capital K Home is relatively labour abundant and Foreign is relatively capital abundant. Assume that sugar is relatively capital intensive and milk is relatively labour intensive. Answer the following questions:
i Discuss the pattern of trade between the two countries.
Under what conditions factor price equalization may be obtained? Discuss with help of a diagram showing the segment of equalization.
Draw the graphs
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