What is Comparative Advantage?
- Comparative advantage is the ability to produce a good or service at a lower opportunity cost than other producers.
How Do I Remember It?
- Think of comparative advantage as being really good at something compared to others. It’s like finding your niche where you can produce or do something more efficiently, allowing for specialization.
Real World Example
- Suppose Country A can produce both cars and computers, but it is more efficient in producing cars compared to Country B. Country B, on the other hand, is more efficient in producing computers.
- To maximize overall production, it makes sense for each country to specialize in what they do best, with Country A focusing on cars and Country B on computers. This demonstrates the concept of comparative advantage in international trade.
Follow us on TikTok, Instagram, and YouTube below.
