El Salvador has a population density of about 620 people per square mile and neighboring Honduras a population density of about 115 people per square mile.According to the factor proportions theory of trade, one would expect El Salvador's exports to Honduras to ________.

Question

Quizplus · Accepted Answer

According to the factor proportions theory of trade, countries tend to export goods that require relatively abundant factors of production and import goods that require relatively scarce factors of production. In this case, El Salvador has a higher population density than Honduras, indicating that it has relatively more labor compared to land than Honduras. Therefore, one would expect El Salvador, as an exporting country, to specialize in producing goods that rely more heavily on labor, i.e., have a higher labor-to-land ratio than its imports from Honduras.

El Salvador Has a Population Density of About 620 People