What is meant by comparative advantage in trade?

Comparative advantage is where countries stick to what they are best at producing and trade those goods with each other. It does not matter if one country is worse at making, say, bread, than the country it is trading with - but that if bread is what it is good at producing then it should make this and trade its bread abroad. Likewise, the other country should produce only what it is best at producing. [This can be shown through a diagram with two countries producing two goods. To demonstrate this, I will require the whiteboard feature.]

CR

Related Economics A Level answers

All answers ▸

What are diminishing returns?


How would you go about calculating inflation using CPI (consumer price index)


With over 12.7 million mobile phone contracts being offered in the UK, is it possible for a consumer to make a rational decision when selecting a mobile phone tariff?


How do I work out the different elasticites of demand?