FACTOR PRICE EQUALISATION THEOREM
*Given by Samuelson (1948) and Lerner (1953)
ASSUMPTIONS:- 1) 22*2 Model 2)Factor supply is fixed and factor is fully employed. 3)Free trade 4)No transportation cost. 5) Production function exhibit constant RTS.
According to this theorem free trade will not only equalize commodity prices but also factor prices so that workers get equal wages and capital get equal
rental return in both the countries. So when prices of output goods are equalised b/w countries the prices of input factors will also be equalised.
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