comparative advantage

Created: 2022-12-27
Status: #soil
Last Edited: 2022-12-27
Topic: economics trade

What is comparative advantage?

Comparative advantage is an economic concept which states that countries, businesses, or individuals have an advantage in producing certain goods or services at a lower opportunity cost than others.

It is based on the idea that each country, business, or individual has different strengths and weaknesses in terms of cost and efficiency. This means that one country can produce a good or service more efficiently than another at a lower price relative to its opportunity cost. This then allows them to specialize in the production of that good or service and trade for other goods and services with countries that specialize in producing them.