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Germany is a country abundant in capital (K) and therefore produces automotive parts. China, on the other hand, are abundant in labour (L), hence producing
Germany is a country abundant in capital (K) and therefore produces automotive parts. China, on the other hand, are abundant in labour (L), hence producing a significant amount of textile goods. Using the H-O model and relevant economic diagrams, demonstrate how trade between Germany and China may be mutually beneficial when contrasted to the scenario where they do not trade. Comment specifically on the effects on the factor prices and the factor intensities used to produce the goods in both countries.
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