From Factor Prices Equalization to Output Prices Equalization

Abstract

This paper is addresses to see how the impact of the factor price equalization in product prices equalization. According to Heckser-Ohlin (H-0) model, trade in goods will cause the absolute and relative prices of factor between counties to move toward equality, If free trade occurs, factor prices between countries will not different when countries producing the same mix of product with the same technologies and the same product price must have the same factor prices. Product prices equalization will occur when the countries have same set unit value isoquant and, as well under CRS condition MPL and MPk are constant along expansion paths of each industries