Problem
1. How does the existence of demand reversal complicate the predictions of Heckscher-Ohlin?
2. Using the specific-factors model, explain why you might expect to see certain capital owners and labor groups arguing against expanding trade in a capital-abundant country.
3. Given your knowledge of the basis for trade, would you be surprised or not to learn that the composition of the exports and imports of a former Soviet bloc country such as Hungary or Poland changed with the dissolution of the Soviet Union and the opening of trade with the West? Explain your answer.