The Theory of Comparative Advantage

The Theory of Comparative Advantage suggests that countries benefit economically when they specialize in producing goods and services they can produce most efficiently relative to others. Even if one country is better at making everything, it should still focus on what it does comparatively better, and trade with others for what they do best. This specialization and trade allow all participating countries to enjoy more goods and services than they could produce alone, increasing overall economic welfare. Essentially, it’s about working smarter by leveraging each country’s unique strengths through mutually beneficial trade.