Q. The Specific Factors model makes a distinction between general-purpose factors that can move between sectors and factors that are specific to particular uses. How do differences in the availabilities of the specific factors form the basis for international trade? Identify factors, which are specific, and explain in what sense or context they are specific.
Answer: This model posits a nil elasticity of technical substitution of a "specific" factor" among the two products. Therefore if the supply of one of these is (relatively) small, after that the marginal product of labour in that industry will be low. Since every country is producing some of each, the wage rate have to be equal in both sectors. Therefore, the country will not be capable of produce and sell the product competitively. An illustration of a specific factor might be an engineer trained to operate and maintain a certain type of machine or land which can be used to raise only one type of crop.