What is comparative advantage?

Comparative Advantage

In economics, the law of comparative advantage refers to the ability of a party to produce a particular good or service at a lower marginal and opportunity cost over another. Even if one country is more efficient in the production of all goods (absolute advantage in all goods) than the other, both countries will still gain by trading with each other, as long as they have different relative efficiencies.

Read more about Comparative Advantage.

Some articles on comparative advantage:

Export-led Growth - Limitations
... for its lack of product diversity as economies pursue their comparative advantage, which makes the economies potentially unstable if demand for their specialization falls this is ... This is true of many economies aiming to exploit their comparative advantage in primary commodities as they have a long term trend of declining ... Also to exploit a potential comparative advantage requires a significant amount of investment which governments can only supply a limited amount of ...
Free Trade Debate - Criticisms of Free Trade - Economic Arguments Against Free Trade - Capital Mobility and Comparative Advantage
... Some descriptions of comparative advantage rest on a necessary condition of capital immobility ... If financial or labor resources can move between countries, then comparative advantage erodes, and absolute advantage dominates ... the Heckscher-Ohlin model derives comparative advantage from differing relative abundances of capital and labour between countries ...
Comparative Advantage - Considerations - Free Mobility of Capital in A Globalized World
... of the University of Maryland, have voiced concern over the applicability of Ricardo's theory of comparative advantage in light of a perceived increase in ... The economist Paul Craig Roberts notes that the comparative advantage principles developed by David Ricardo do not hold where the factors of production ... model expands from one good to multiple goods, the absolute may turn to a comparative advantage ...
Modern Economics - Microeconomics - Specialization
... According to theory, this may give a comparative advantage in production of goods that make more intensive use of the relatively more abundant, thus ... Even if one region has an absolute advantage as to the ratio of its outputs to inputs in every type of output, it may still specialize in the output in which it has a comparative advantage and thereby ... and productive inputs select an allocation of factor inputs by comparative advantage, so that (relatively) low-cost inputs go to producing low-cost outputs ...
Ricardian Economics - Comparative Advantage
... Ricardo devised an idea that is well known as the theory of comparative advantage (Henderson 827, Fesfeld 325) ... According to the Washington Council on International Trade, comparative advantage is the ability to produce a good at a lower cost, relative to other goods, compared to another ... In the Principles of Economics, Ricardo states that comparative advantage is a specialization technique used to create more efficient production (52) and describes opportunity cost between producers (53) ...

Famous quotes containing the words advantage and/or comparative:

    We took advantage of [the Indians’] ignorance and inexperience to incline them the more easily toward treachery, lewdness, avarice, and every sort of inhumanity and cruelty, after the example and pattern of our ways.
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