What is the concept of comparative advantage?
Considering this, what is the concept of comparative advantage based on?
In an economic model, agents have a comparative advantage over others in producing a particular good if they can produce that good at a lower relative opportunity cost or autarky price, i.e. at a lower relative marginal cost prior to trade.
Subsequently, question is, what is the law comparative advantage? “The Law of Comparative Advantage states that an entity maximises its resources by producing that which gives the best return, while delegating production of all other products and services to other entities more cost-effective in their production”
In this regard, what is an example of a comparative advantage?
Comparative advantage is when a country produces a good or service for a lower opportunity cost than other countries. But the good or service has a low opportunity cost for other countries to import. For example, oil-producing nations have a comparative advantage in chemicals.
What is the concept of absolute advantage?
In economics, the principle of absolute advantage refers to the ability of a party (an individual, or firm, or country) to produce a greater quantity of a good, product, or service than competitors, using the same amount of resources.