Why it matters
Someone can be more productive at every task and still benefit from exchanging with another producer. The relevant comparison is what each gives up, not simply who is fastest.
A worked example
In one hour, A can make 4 meals or 2 repairs; B can make 2 meals or 2 repairs. A gives up half a repair per meal, B gives up one. A has a comparative advantage in meals.
Illustrative example · simplified assumptionsA common mistake
Assuming whoever is faster at everything has every comparative advantage.
Where the idea needs care
Trade can create gains, but their distribution, adjustment costs and trading terms still matter.
Apply the idea
Explain this concept using a different example from your spending, work, business or a policy debate. State what stays fixed and what could change the result.
Sources and further study
Examples and explanations by Alibomics. Numeric illustrations are not current market quotations.