Answer to Question #124448 in Microeconomics for Mustak Ahmad

Question

Heckscher-Ohlin Theory begins where Comparative advantage theory ends. Discuss.

Answer 1

The theory of comparative advantage states that if countries focus in creating goods where they have a lower opportunity cost, there will be an increase in economic welfare. 

On the other hand, Heckscher ohlin theory is more of an extension of comparative theory with conditions called factors endowments that explains the advantages that arise from differences in national factor endowments. 

These factor endowments include; land, capital and labor. The Hechscher –Ohlin theory states that the basis of international trade is the comparative costs difference and it explains the real cause of these difference in comparative costs