word
Comparative Advantage
kum-PAIR-uh-tiv ad-VAN-tij
/kəmˈpærətɪv ədˈvæntɪdʒ/Listen
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Syllable breakdown
comparativeadvantage
Dictionary meaning
The economic principle, developed by David Ricardo, that a country (or entity) should specialise in and export the goods it can produce at a lower opportunity cost relative to other countries, even if it has an absolute advantage in all goods; the foundation of modern trade theory.
Examples
- Even though Germany produces both cars and wine efficiently, comparative advantage suggests it should focus on cars and import wine from France.
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