Question
The Stolper-Samuelson theorem is a result in
international trade theory. According to this theorem, an increase in the price of a good will:Solution
The Stolper-Samuelson theorem states that when the price of a good increases, the real income (wage, rent, etc.) of the factor of production used intensively in producing that good will increase, while the real income of the factor used less intensively will decrease. This reflects how trade impacts income distribution across different factors of production. For example, if a country is capital-abundant and the price of capital-intensive goods rises, capital owners will benefit, and laborers may lose
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