- comparative advantage
Economic theory first advanced by Robert Torrens and David Ricardo that analyzes international trade in terms of differences in relative opportunity costs.The theory suggests that countries should specialize in the goods they can produce most efficiently rather than trying for self-sufficiency and argues strongly in favour of free international trade.
* * *▪ economic theoryeconomic theory, first developed by 19th-century English economist David Ricardo (Ricardo, David), that attributed the cause and benefits of international trade to the differences among countries in the relative opportunity costs (costs in terms of other goods given up) of producing the same commodities. In Ricardo's theory, which was based on the labour theory of value (in effect, making labour the only factor of production), the fact that one country could produce everything more efficiently than another was not an argument against international trade.In a simplified example involving two countries and two goods, if country A must give up three units of good x for every unit of good y produced, and country B must give up only two units of good x for every unit of good y, both countries would benefit if country B specialized in the production of y and country A specialized in the production of x. B could then exchange one unit of y for between two and three units of x (before trade, for only two units of x), and A could receive between one-third and one-half unit of y (before trade, only one-third unit of y) for every unit of x. This is true even though B may be absolutely less efficient than A in the production of both commodities.The theory of comparative advantage provides a strong argument in favour of free trade and specialization among countries. The issue becomes much more complex, however, as the theory's simplifying assumptions—a single factor of production, a given stock of resources, full employment, and a balanced exchange of goods—are replaced by more-realistic parameters.
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Comparative advantage — Economics … Wikipedia
comparative advantage — Theory suggesting that specialization by countries can increase worldwide production. Bloomberg Financial Dictionary * * * comparative advantage comparative advantage ➔ advantage * * * comparative advantage UK US noun ECONOMICS ► [C] an advantage … Financial and business terms
Comparative Advantage — The idea of “comparative advantage” is a principal component of the doctrine of free trade; it was articulated most coherently in The Principles of Political Economy, published in 1819 by the economist David Ricardo. Developing ideas on… … Encyclopedia of the Age of Imperialism, 1800–1914
Comparative Advantage — A situation in which a country, individual, company or region can produce a good at a lower opportunity cost than a competitor. Let s break this down into a simple example. Suppose that two firms both produce two main products: ice cream and… … Investment dictionary
comparative advantage — The relative efficiency in a particular economic activity of an individual or group of individuals over another economic activity, compared to another individual or group. One of the fundamental propositions of economics is that if individuals or … Accounting dictionary
comparative advantage — santykinis pranašumas statusas T sritis Politika apibrėžtis Valstybės ekonomikos gebėjimas efektyviau negu kitose šalyse gaminti prekes ar teikti kitas paslaugas. Kertinė laisvos tarptautinės prekybos pagrindimo koncepcija, ją suformulavo britų… … Politikos mokslų enciklopedinis žodynas
comparative advantage — noun : the advantage enjoyed by a person or country in the cost ratio of one commodity to another in comparison with the ratio of costs of these same commodities elsewhere … Useful english dictionary
comparative advantage — the idea that areas tend to be more efficient in certain economic activities than others and so should specialise in them in order to maximize their quality of life through trade … Geography glossary
comparative advantage — relative benefit, something which is beneficial when compared to the other options … English contemporary dictionary
comparative advantage — noun Economics the ability of an individual or group to carry out a particular economic activity more efficiently than another activity … English new terms dictionary