Verbally and graphically present the benefits of trade from the perspective of the HO model. List and briefly explain two main implications of trade according to this model.
The HO model emphasizes how countries can benefit from international trade by exporting what they have in abundance. By not having to rely solely on internal markets, countries are able to take advantage of more elastic demand. As countries develop and labor costs increase, their marginal productivity declines. By trading internationally, they are able to shift to capital-intensive goods, which could not occur if they only can sell internally.