- 2x2x2 h- o model: 2 nations (a and b); 2 factors of production (capital and labor); 2 commodities (commodity x and y);
- different factor intensities in the 2 commodities (capital- intensive and labor- intensive goods);
- both nations use the same technology in production;
- Production is under constant return to scale for both commodities in both nations – increasing amount of labor and capital used in the production of any commodity will increase output of the commodity in the same proportion;
- tastes and preferences are equal/identical in both nations;
- perfect competition in both commodities and factor markets;
- factors are freely moved within each nation but not between nations (no international factor mobility);
- no transportation costs;
- no trade barriers;