What Is Comparative Advantage?


Quick Answer

In economic theory, an entity is said to have a comparative advantage if it is able to produce a good at a lower cost than anyone else. Consequently, concentrating on producing more of that good to trade for other goods is in the acting subject's economic interest

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Full Answer

For example, if Portugal requires 80 workers to make wine and 90 workers to make cloth, and if England needs 100 workers to make wine and 70 workers to make cloth, the theory of comparative advantage holds that Portugal should devote its capital and labor to making more wine to trade for cloth from England.

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