Comparative Advantage

In business economics this refers to the trading advantage one country has over another. It refers to the theory that, for greatest efficiency, countries should specialise in their areas of comparative advantage and trade with other countries for other goods and services.

For example, Comparative Advantage can occur from natural resources (coal, gas, gold etc), climate (e.g. for agriculture), labour (both its quantity and skill levels), technological knowledge, geographical access to markets.

Comparative Advantage is a term normally found in business economics and financial management.

Explore our learning zone to discover more