Comparative advantage

Definition

Comparative advantage is the economic theory that a country should specialize in producing and exporting goods and services for which it is relatively more efficient at producing, compared to other countries, even if it could produce other goods more efficiently itself. This specialization allows for increased overall efficiency and trade benefits between countries.

Related terms

International Trade: The exchange of goods, services, and capital across international borders or territories.

Efficiency: An economic state where every resource is optimally allocated to serve each individual or entity in the best way while minimizing waste and inefficiency.

Specialization: The process of concentrating on and becoming expert in a particular subject or skill, often leading to increased efficiency and productivity in economic contexts