homework, international-tradeI have a homework problem with this graph. It is said to be a Heckscher–Ohlin model without two (homogeneous) factors of production. X and Y are two goods produced in both countries, and S and W are the two demand curves.
The question is what would happen if the countries were opened to international commerce. Hence, what would be the equilibrium on the graph?
I have a feeling that both countries have the same abundant factor, so my first guess would that they would both produce at E. Is that right?
But then again, why would they open to international commerce? There is no price change, so why would any country export or import?
Thanks for the help!
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