РFigure 4.1 shows relative demand curves for labor in each industry.РAssumptions of the Heckscher-Ohlin ModelРAs we work through the H-O model, we remember that these are relative demand curves for labor; ? ? The “quantity” on the horizontal axis is the ratio of labor to capital used in production, and the “price” is the ratio of the labor wage to the capital rental.РAssumptions of the Heckscher-Ohlin ModelРForeign is labor abundant. Equivalently, Home is capital abundant?L*/K* > L/K and K/L > K*/L*?Here, we do not consider why the amount of resources differs across countries. Take as given.РThe final outputs, shoes puters, can be traded freely, without restrictions, between nations, but labor and capital do not move between countries.?Latter assumption will be relaxed in the next chapter.
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