Ricardo's Comparative Advantage

Ricardo's theory of comparative advantage explains that countries benefit from specializing in producing goods where they have the lowest opportunity cost, even if one country is better at producing everything. By focusing on what they do relatively more efficiently, and trading with others, all parties can enjoy more goods and services. This special arrangement increases overall economic efficiency and wealth, as each country leverages its unique strengths rather than trying to produce everything on its own. In essence, comparative advantage highlights how cooperation and specialization make trade beneficial for everyone involved.