Ricardo's Law

Ricardo's Law states that in a market with two countries trading two goods, the opportunity cost of producing each good influences trade patterns. A country will specialize in producing the good for which it has a comparative advantage—meaning it sacrifices less of one good to produce the other. This specialization leads to increased overall efficiency and higher total output, benefiting both countries through mutually beneficial trade. Essentially, countries should focus on what they produce relatively better and trade for other goods, maximizing global productivity and economic gains.