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What is Comparative Advantage

A country or region has a comparative advantage in the production of those goods and services in which its relative efficiency is greatest. Comparative advantage matters because a country or region can maximise its consumption of goods and services by concentrating its resources in the production of goods and services in which it has a comparative advantage, and trading its surplus production with those countries or regions which specialise in the production of goods and services in which they have a comparative advantage.

Crown Copyright. Material taken from HM-Treasury. Reproduced under the terms and conditions of the Click-Use Licence.

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Term created / updated 2007-03-20 22:40:26

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