Question

I prepared the following video to explain how the world has moved from protectionist, Mercantilist era to the 21st century free trade principles in the past few centuries. Towards the end of this video, I gave an example to support the advantage of specialization, comparative advantage and trade using my own experiences. What is comparative advantage? Please explain the concept of comparative advantage using an example from your experiences. Why don't you produce everything that you need yourself?

International Trade Theories http://screencast-o-matic.com/watch/cbef0f6tk5 (10 min)

Please see the notes section in the video for transcripts.

Answer 1

By comparative advantage we mean country or entity has lower cost in production of a good or service than others. E. G I type on desktop at better speed that many typing assistant's but often use their service because my job at that time is more important. In other words opportunity cost of typing for me is very high. We do not produce everything because it leds to inefficiency. We focus on only those jobs in which our productivity is very high. Our opportunity cost of doing other things is very high