Okuzeka
Economics vocabulary · Trade and Exchange Rates

Comparative advantage

Meaning in economics, with examples

/kəmˈpærətɪv ədˈvɑːntɪdʒ/nounCommon term

In economics, comparative advantage means: The ability of a country or person to produce something at a lower opportunity cost than others; it is the basis of the gains from trade.

In Turkish: karşılaştırmalı üstünlük

How it is used

An idea associated with David Ricardo (1817). It explains why countries gain by specialising even if one of them is better at producing everything (absolute advantage). Countries have, gain or lose a comparative advantage in a sector.

Example sentences

  1. The country has a comparative advantage in textiles because of its skilled, relatively low-cost workforce.

  2. In Ricardo's example, Portugal had a comparative advantage in wine and England in cloth.

Common collocations

  • have a comparative advantage in
  • the theory of comparative advantage
  • absolute advantage
  • lose comparative advantage
  • opportunity costThe value of the best alternative you give up when you make a choice, for example the salary you lose by studying full time instead of working.
  • free tradeInternational trade with few or no barriers such as tariffs, quotas or subsidies, so that goods and services move freely between countries.
  • exportA good or service sold to buyers in another country; as a verb, to sell goods or services abroad.
  • protectionismPolicies that shield domestic producers from foreign competition, for example through tariffs, import quotas or subsidies.

More terms: Trade and Exchange Rates

Practise with graded reading

Reading at the right level is the fastest way to make new words stick. Pick free English books by level:

This page explains English vocabulary for learners. It is not financial advice.