Journal of Biochemistry Research

Factor Price Equalization

 Factor worth exploit is associate degree theory, by Paul A. Samuelson (1948), that states that the costs of identical factors of production, like the wage rate, or the rent of capital, are going to be equal across countries as a results of international exchange commodities. the concept assumes that there ar 2 product and 2 factors of production, as an example capital and labour. different key assumptions of the concept ar that every country faces identical trade goods costs, as a result of trade in commodities, uses identical technology for production, and produces each product. Crucially these assumptions lead to issue costs being equal across countries while not the requirement for issue quality, like migration of labor or capital flows.   A simple outline of this theory is once the costs of the output product ar equal between countries as they move to trade, then the costs of the factors (capital and labor) will be equal between countries.   Whichever issue receives all-time low worth before 2 countries integrate economically and effectively become one market can so tend to become costlier relative to different factors within the economy, whereas those with the best worth can tend to become cheaper. during a utterly competitive market the come back to an element of production depends upon the worth of its marginal productivity. The marginal productivity of an element, like labor, successively depends upon quantity|the quantity|the number} of labor getting used similarly because the amount of capital.  

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