Comparative Advantage
What is Comparative Advantage?
The ability to produce something at a lower opportunity cost than others.
Understanding Comparative Advantage
Comparative advantage, explained by David Ricardo in 1817, shows why trade benefits both sides even when one is better at producing everything. What matters is not absolute skill but what each producer gives up.
By specializing in what they give up least to make, and trading for the rest, countries and people can consume more than they could alone.