ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Comparative advantage is the ability of an individual or group to carry out a particular economic activity, such as providing a specific product or service, more efficiently than another activity.

Detailed explanation-2: -Comparative advantage is an economy’s ability to produce a particular good or service at a lower opportunity cost than its trading partners. The theory of comparative advantage introduces opportunity cost as a factor for analysis in choosing between different options for production.

Detailed explanation-3: -The benefit of comparative advantage is the ability to produce a good or service for a lower opportunity cost. A comparative advantage gives companies the ability to sell goods and services at lower prices than their competitors, gaining stronger sales margins and greater profitability.

Detailed explanation-4: -For example, if a country is skilled at making both cheese and chocolate, they may determine how much labor goes into producing each good. If it takes one hour of labor to produce 10 units of cheese and one of of labor to produce 20 units of chocolate, then this country has a comparative advantage in making chocolate.

Detailed explanation-5: -The theory of comparative advantage holds that even if one nation can produce all goods more cheaply than can another nation, both nations can still trade under conditions where each benefits. Under this theory, what matters is relative efficiency.