+ 
= 
+ 
= 
+ 
= 
+ 
= 
In each country, both L and K are fully employed to produce X and Y, i.e.
| + =
|
| + =
|
| + =
|
| + =
|
The price of each good consists of factor prices only, i.e.
 =   +
 
|
 =  +
|
 =   +
 
|
 =  +
|
A homothetic funtion is a homogenous function of degree one which is monotonously transformed.