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    economics Keeley

    can someone explain the law of comparitive to me please??

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      It's to do with international trade really, so to define it, comparative advantage refers to the ability to produce a particular good or service at a lower marginal (and opportunity) cost over another. (Marginal cost is the difference of producing that one extra good). Even if one country is more efficient in the production of all goods than the other, both countries will still gain by trading with each other.

      Wikipedia gives this example: If, using machinery, a worker in one country can produce both shoes and shirts at 6 per hour, and a worker in a country with less machinery can produce either 2 shoes or 4 shirts in an hour, each country can gain from trade because their internal trade-offs between shoes and shirts are different. The less-efficient country has a comparative advantage in shirts, so it finds it more efficient to produce shirts and trade them to the more-efficient country for shoes. Without trade, its cost to make a shirt was 1 shoe; by trading, its cost per shirt can go as low as 1/2 shoe depending on how much trade occurs.

      Confusing though, It should be in the book

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