One of the fundamental results in the pure theory of international trade is the factor-price equalization theorem. This result has wider applicability than to the area of trade, for fundamentally it is a statement of the relationship between any economy's commodity prices and the returns to its productive factors, whether or not that economy is engaged in trade. It is not surprising that the prices of commodities into which factors enter as productive agents influence the returns earned by those factors in a competitive market. What is surprising is that (under appropriate conditions) the quantities of the factors available for employment in the economy - the factor endowments - have no independent role to play in influencing factor prices. This dependence of factor price only upon commodity prices is the essence of the theorem.

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