comparative advantage
Trade theory cornerstone
Comparative advantage is an economic principle explaining why entities benefit from trade even when one is more efficient at producing everything.
A country or person has comparative advantage in producing goods where their opportunity cost is lowest relative to others.
China has a comparative advantage in manufacturing; the U.S. in financial services.
The concept, central to trade theory, shows that specialization and exchange create mutual gains—not because one party is absolutely better, but because each sacrifices less by focusing on what they do relatively best.
Foreign-bound sale
- importObtain from overseas
- RicardoSpanish male given name
- opportunity costSacrificed alternative's worth
- specializationConcentrated expertise in one field
tariff · free trade · trade surplus · trade deficit · trade barriers · globalization · protectionism · mercantilism
Concentrated expertise in one field
- division of laborSplitting tasks among workers
- resource allocationAssigning available means strategically
- economies of scaleCost advantages from size
- labor productivityOutput relative to input
output · efficiency · opportunity cost · input-output · yield · manufacturing · domestic production · production costs
Sacrificed alternative's worth
- scarcityInsufficiency of something needed
- resource allocationAssigning available means strategically
- efficiencyProductive without waste
- marginal costPer-unit production increase expense
economic theory · classical economics · optimization · cost-benefit · mutual benefit
export
Foreign-bound sale
- importObtain from overseas
- RicardoSpanish male given name
- opportunity costSacrificed alternative's worth
specialization · tariff · free trade · trade surplus · trade deficit · trade barriers · globalization · protectionism · mercantilism · exchange
specialization
Concentrated expertise in one field
- division of laborSplitting tasks among workers
- resource allocationAssigning available means strategically
- economies of scaleCost advantages from size
labor productivity · output · efficiency · opportunity cost · input-output · yield · manufacturing · domestic production · production costs · labor-intensive
opportunity cost
Sacrificed alternative's worth
- scarcityInsufficiency of something needed
- resource allocationAssigning available means strategically
- efficiencyProductive without waste
marginal cost · economic theory · classical economics · optimization · cost-benefit · mutual benefit
- capitalismcapitalism, free market, free enterprise, private property, profit motive
- economicssupply and demand, inflation, GDP, GNP, gross domestic product
- tradetrade balance, free trade, trade barriers, customs, trade deficit
- globalizationglobalization, free trade, global village, global trade, multinationals
- theories & lawssupply and demand, law of demand, law of supply, Parkinson's law, Peter principle
- microeconomicsdemand, supply, supply and demand, price, market
compare, advantage, comparison, compared, comparing, compares, comparative, advantages, advantageous