Definition
- Comparative advantage
- A country has a comparative advantage in a good when it can produce it at a lower cost in terms of other goods given up than another country.
- Not to be confused with: Absolute advantage
- A country has an absolute advantage over another country in producing a good if it uses fewer resources to produce that good.
Test yourself
What is the difference between comparative advantage and absolute advantage?
Absolute advantage compares resources used; comparative advantage compares what is given up.
Learn it properly: the module
Also in: International competitiveness, Changing patterns of world trade