This problem uses the Heckscher-Ohlin model to predict the direction of trade. Consider the production of handmade rugs and assembly line robots in Canada and India.

a.Which country would you expect to be relatively labour-abundant, and which is capital-abundant? Why?

b.Which industry would you expect to be relatively labour-intensive, and which is capital-intensive? Why?

c.Which of the following two graphs (Graph 1 is on the left, Graph 2 is on the right) depicts trade in Canada, why? For triangles BCD (in Graph 1) and (in Graph 2), identify the relevant portions that show imports and exports in Canada and India, explain.

Output of rugs, QRU Output of rugs, QRu B B A C' D' C C Output of robots, QRO Output of robots, Q RO