Q. One of the usually used assumptions in deriving the Heckscher-Ohlin model is that tastes are homothetic, or that if the per capita incomes were the similar in two countries, the proportions of their expenditures allocated to every product would be the same as it is in the other country. See that this assumption is false, and that in fact, the tastes in every country are strongly biased in favor of the product in which it has a comparative advantage. How could this affect the relationship between relative factor abundance between the two countries, and the nature (factor-intensity) of the product each exports? What if the taste bias favored the imported good?

Answer: If in fact national tastes were powerfully biased in favour of the product in which he country enjoyed a comparative advantage after that we would expect a bias in favour of ejecting the Heckscher-Ohlin Theorem in actual trade data. The engine driving the H-O model is that a country must be expected to have a relatively low cost of producing the good in which it has a comparative advantage. Though the respective order forces would tend to raise the price of this good thus that the expected pattern would not generally be observed. Though, if the tastes were biased in favour of the imported good when the predictions of the Heckscher-Ohlin Theorem would be expected to be generally observed.