Question
Factor Price Equalisation Theorem
Answer :
Word Count : 259
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The Factor Price Equalisation (FPE) theorem is a key concept in international trade theory, particularly under the Heckscher-Ohlin framework. It explains how international trade in goods can lead to the equalization of factor prices, such as wages for labor and returns on capital, across countries, even in the absence of factor mobility. The theorem assumes that countries produce goods using different combinations of factors of production, and
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