Sterling Terrell

recovering economist

Economics 101: What Is Comparative Advantage?

Economics 101: What Is Comparative Advantage?

[This is part of the series: The Complete Guide To Economics 101.]

What is comparative advantage in economics?

Comparative Advantage compares opportunity cost among producers asking: Who has to give up the least in order to produce X or Y?

Absolute advantage, however, compares the output of someone, or some group, to another.

Examples of comparative advantage include:

  • A certain CEO might type faster than his secretary. But what does the CEO have to give up in order to spend his day typing?
  • A brain surgeon might have a very high opportunity cost of using a wood saw. What does a surgeon give up if they permanently hurt their hand?
  • What state has a comparative advantage in growing oranges? Florida? Or, Texas?
  • What country has a comparative advantage in growing tobacco? Cuba? Or, Saudi Arabia?

Random Thoughts – 58

Random Thoughts – 58

1. Maybe money is not true wealth. Maybe time is.

2. Your attitude is one of the few things you can control.

3. The joy of travel is nothing more than being somewhere I have never been, with the people I love.

4. You don’t know what you are made of until there is nothing to do but get up.

5. “Very many people spend money in ways quite different from those that their natural tastes would enjoing, merely because the respect of their neighbors depends upon their possession of a good car and their ability to give good dinners. As a matter of fact, any man who can obviously afford a car but genuinely prefers travels or a good library will in the end be much more respected than if he behaved exactly like everyone else . BERTRAND RUSSELL, THE CONQUEST OF HAPPINESS.

-Rolf Potts, Vagabonding (Amazon)

Sterling Terrell