In a short essay, explain the factor proportions theory. How does the theory differ from other theories?

What will be an ideal response?

The factor proportions theory suggests that each country should export products that intensively use relatively abundant factors of production and import goods that intensively use relatively scarce factors of production. For example, the United States produces and exports capital-intensive products, such as pharmaceuticals and commercial aircraft. Argentina produces land-intensive products, such as wine and sunflower seeds.
This view rests on two premises:
• Products differ in the types and quantities of factors (labor, natural resources, and capital) required for their production; and
• Countries differ in the type and quantity of production factors that they possess.
Factor proportions theory differs somewhat from earlier theories by emphasizing the importance of each nation's factors of production. The theory states that, in addition to differences in the efficiency of production, differences in the quantity of production factors held by countries also determine international trade patterns. In this way, a country that possesses an abundance of a given production factor (e.g., labor, land) obtains a per-unit-cost advantage in the production of goods that intensively use that factor.