Determine which producer should specialize in which good based on opportunity costs.
Enter how many units each producer can make per hour (or per unit of resource).
Concept: Opportunity Cost of X = Y given up / X produced Opportunity Cost of Y = X given up / Y produced Lower opportunity cost = comparative advantage
What is Comparative Advantage?
Comparative advantage, developed by David Ricardo, states that even if one country can produce everything more efficiently (absolute advantage), trade is still beneficial. Each country should specialize in the good where it has the lowest opportunity cost.
Key Difference: Absolute vs Comparative
Absolute Advantage: Who produces more with the same resources
Comparative Advantage: Who gives up less of one good to produce another