Factor intensity

Factor intensity is the relative quantities of production factors, such as labor and capital, used to produce a good. It distinguishes goods by their input proportions, not by total production scale.

Factor proportions: The relative quantities of different inputs used in production. Factor intensity describes a good through its factor proportions.
Heckscher–Ohlin model: A trade model in which countries export goods that use their abundant factors intensively. It turns differences in goods’ factor intensities into predictions about trade.
Labor-intensive good: A good produced using a relatively high proportion of labor compared with another factor. It is one side of the standard labor-versus-capital intensity comparison.
Factors of production: Resources used to produce goods and services, commonly including labor, capital, land, and entrepreneurship. Factor intensity compares the quantities of these productive resources.
Production function: A mathematical relationship between inputs and the maximum output they can produce. It represents the technology that determines feasible input combinations for a good.
Factor abundance: A country’s relative supply of a production factor compared with other factors or countries. Comparing factor abundance with goods’ factor intensities predicts comparative advantage.
Capital-intensive good: A good produced using a relatively high proportion of capital compared with another factor. It contrasts with labor-intensive production in two-factor trade models.
Isoquant: A curve showing input combinations that produce the same quantity of output. Its slope and shape show the input combinations available for a good.
Elasticity of substitution: A measure of how readily one input can replace another while maintaining output. It indicates how much factor proportions can adjust when relative input costs change.
Stolper–Samuelson theorem: A theorem linking changes in goods prices to changes in real returns to production factors. It connects trade-driven price changes to gains and losses among factor owners.

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