... payment (w)". This assumption relaxes the assumption from the ones in the classical model, as they implied labour was the only factor of production, meaning that the amount of labour would be fixed at the same amount among countries. The second additional assumption we are required to make is "the technology sets available to each country are identical" (Husted and Melvin, 2004). This assumption says that the way the good(s) are made will be the same. Therefore they will have the same labour and capital ratio to produce the goods. If in one country labour is cheaper than capital, they will produce the labour intensive good and export this in payment for the capital intensive good, which is usually produced by the partner country. The third new assumption says,"in both countries, the production of textiles always requires more labour per machine than the production of soybeans. The production of both goods in ...

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