Impact of an increase in capital on production and welfare in a Heckscher-Ohlin model. Version of the Rybczyski theorem. Impact on trade volume as well.
What if suppose country a, which has a relative abundance of capital, further expands its endowment of capital. how this might effect the volume (amount) of trade and the international terms of trade with the rest of the world? under what conditions would the economic well-being of country a go down after this increase in capital?
I think we you first post points A and B, you marked wrong positions. If this country consumes X at B more than its production of X at A, the country is importing good X. However, the country is supposed to be K-abundant and Good X is K-intensive good. How come the country needs to import it? It is contradict to H-O theorem, is it?
+Mashkur Alakbarov Commodity and factor prices do remain unchanged. But the expansion of resources will allow for more production (and increased total income and therefore higher welfare). The real focus of Rybczynski is how increased endowments change the pattern of production as capital and labor are allowed to move freely across industries---so it is a "long run" analysis.
