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Comparative advantage is nothing but an edge one company has over the other (competitor) in a business which may help the former company to succeed and overtake the other in business. The comparative advantage can be of any type - it can be better geographical location, better natural resources, better logistics availability, cheap manpower, patented technology etc.
I have underlined a word in the second sentence stressing on its importance as I was interested to stress the importance of the company's ability to play on its comparative advantage to overtake its competitor. Many giants have collapsed as they could not put their advantage to use.
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Its the ability of a firm or individual to produce goods and services at a lower opportunity cost than other firms or individuals
A comparative advantage gives a company the ability to sell goods and services at a lower price than its competitors and realize stronger sales margins
I agree with all the answers .
Comparative advantage has to do with international trade. Comparative advantage takes place in free trade and it is basically the ability of a person or organisation to sell its products at a cheaper price than a similar company selling similar products. However, if each company focused on producing the products each of them had an advantage in making, then they would both come out making more money.
Comparative advantage is Saudi Arabia is utilizing its oil reserves to make money and buy cars from USA. Each entity is focusing on what they are good at regardless of the cost.
Hi .. I guess All were able to define that, and I would like to go with this definition:
The ability of a firm or individual to produce goods and/or services at a lower opportunity cost than other firms or individuals. A comparative advantage gives a company the ability to sell goods and services at a lower price than its competitors and realize stronger sales margins.
It is important to note that a comparative advantage is not the same as an absolute advantage. The latter implies that one is the best at something, while comparative advantage relates more to the costs of the particular endeavor.
The name for the ability of one business entity to engage in production at a lower opportunity cost than another entity. Comparative advantage, rather than absolute advantage, is useful in determining what should be produced and what should be acquired though trade.
Etymologically, the meaning is quite transparent. Any advantage an individual, firm or a country possesses as compared to its competitor that reduces the production cost and benefits it, can be a Comparative Advantage. It can be many factors determining a comparative advantage, like geography, raw materials, wages, tax policy etc. We can take an example of growing trade and business in China which is very much benefited by its low waged workers that ultimately reduces the production cost as compared to other nations in the globe.
Comparative advantage occurs when one country can produce a good or service at a lower opportunity cost than another. This means a country can produce a good relatively cheaper than other countries
The theory of comparative advantage states that if countries specialise in producing goods where they have a lower opportunity cost – then there will be an increase in economic welfare.
Note this is different to absolute advantage which looks at the monetary cost of producing a good.
Even if one country is more efficient in the production of all goods (absolute advantage) than the other, both countries will still gain by trading with each other, as long as they have different relative efficiencies.
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