The Heckscher-Ohlin model is an economic model which works to explain how countries seek advantages through international trade, basing decisions on the availability of resources. The model suggests that countries that have an abundance of a certain resource (such as labor or capital) will export the items that rely heavily on that same resource, while importing from other countries those goods that use more of their scarce resources.

The Heckscher-Ohlin model was created by two economists, Eli Heckscher and Bertil Ohlin, in the early 1900s. Their theory revolutionized international trade and demonstrated the usefulness of comparative advantage. The theory states that countries tend to export goods which rely heavily on the resources in which they have an abundance. This is known as the “factor proportion” theory of trade. For example, a country that has a large labor force and a lack of capital might export labor-intensive goods (such as furniture), while importing capital-intensive goods (such as machinery).

The Heckscher-Ohlin model also uses the concept of diminishing returns to explain how an increase in the availability of a certain factor leads to the devaluation and decrease in the demand of commodities produced through the same factor. For instance, if a country specializes in the production of one commodity, the availability of this product will decrease and drive the price down, while the demand for alternative substitute commodities will proportional increase.

In conclusion, the Heckscher-Ohlin model provides a simple yet comprehensive approach to international trade. By focusing on the available natural resources in a given country, the model allows for an understanding of the factors that determine which goods a country should specialize in and then export. The model does have its limitations, such as assuming perfect competition and constant costs of production, however, the Heckscher-Ohlin model serves as one of the most important and influential models in the world of economics.