Question

What is comparative advantage, and why is it important in international trade?

Answer 1

Answer - Comparitive advantage is the advantage of the country to produce more in comparison to the other country and have the lower opportunity cost in production of the good in comparison to the other country.

It decides the path of the flow of good in the international trade. The country should trade only those goods on which it has the comparitive advantage or can produce the good with the lower opportunity cost than the other good. This will help to increase the trade benefits of the countries who produce as per the comparitive advantage.