Question

Why is comparative advantage more important than absolute advantage?

Answer 1

Comparative advantage is the idea that countries can have an advantage over others with respect to the production of a particular good in relation to their production of other goods, even if it is costlier for them to produce all goods in an absolute sense. If each country specializes in the production of goods for which they have a comparative advantage, the countries can trade with one another to achieve greater results than any could on their own. While Absolute advantage means that you can produce more of something than someone else. Comparative advantage means that you can produce something more cheaply than someone else.

For instance, say country X could produce up to 50,000 cars for $1,000 each, and country Y could produce up to 20,000 cars for $500 each. Then country X has the absolute advantage because it can produce more cars, but county Y has the comparative advantage because it can produce a car for less cost.

Countries often specialize in a good in which they have a comparative advantage.

Answer 2

comparative advantage is the ability to produce a good at a lower opportunity cost than another producer (reflecting the relative opportunity cost). ... Comparative advantage is more important for trade.