Comparative Advantage
Economic principle that countries benefit from specializing in products with lowest opportunity cost.
Formula
Comparative Advantage: Specialise where Opportunity Cost is lowest
Real World
Bangladesh has a comparative advantage in garment manufacturing due to low labour costs; even though Germany could produce clothing, it focuses on high-tech machinery where its opportunity cost is lower.
Exam Focus
Never confuse comparative advantage (relative cost) with absolute advantage (lower overall cost) — this distinction is frequently tested.
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