Ask Joey ™ a Question

What is an example of comparative advantage?

Comparative advantage is the specialization in production and trade of specific products with trading partners. The comparative advantage is the ability of an individual or group to carry out a particular economic activity (such as making a car) more efficiently than another activity.

Remember, produce what you specialize in, and insource or outsource what you don’t. Do not try to do everything! As you can see in the example below, California specializes in produce (e.g. avocados) and Saudi Arabia specializes in petroleum. Both parties do what they are good at.

You might also be interested in...

  • What is globalization?

    Globalization is the process by which businesses and organizations develop market influences in international locations in order to scale. Globalization is the distribution of products, technology, information, and jobs across national borders and foreign countries. Globalization describes an interdependence of nations around the globe fostered through free trade. An advantage of globalization is that it […]