Rybczynski theorem

-The Rybczynski theorem demonstrates how changes in an endowment affect the outputs of the goods
when full employment is maintained. The theorem is useful in analyzing the effects of capital
investment, immigration, and emigration within the context of a Heckscher-Ohlin (H-O) model. Consider
Figure 5.2 "Graphical Depiction of Rybczynski Theorem", depicting a labor constraint in red (the steeper
lower line) and a capital constraint in blue (the flatter line). Suppose production occurs initially on the
PPF at point A.

Key Takeaways

 The Rybczynski theorem shows there is a positive relationship between changes in a factor
endowment and changes in the output of the product that uses that factor intensively.
 The Rybczynski theorem shows there is a negative relationship between changes in a factor
endowment and changes in the output of the product that does not use that factor intensively.