What is comparative advantage and why is it important in international trade ?

1 answer:

6 0

Based on the international trade concept, comparative advantage is the ability to produce goods at a cheaper cost than competitors, and it is important in international trade because it enhances resource allocation.

<h3>What is Comparative Advantage?</h3>

Comparative advantage is a term that is used to describe the country's capacity to manufacture a specific good or service at a lower opportunity cost than its trading partners.

Usually, Comparative advantage is utilized to explain why companies, countries, or individuals can profit from the trade.

<h3>Importance of International trade</h3>

It helps countries to allocate resources for more gains
It helps countries to produce goods at a cheaper cost
It helps the country to specialize in production sectors they have more advantages.
It helps countries to improve their exportation income.

Hence, in this case, it is concluded that comparative advantage is beneficial to countries when it comes to production in international trade.

Learn more about Comparative Advantage here: brainly.com/question/12291750

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