What are the advantages of comparative advantages?

The concept of comparative advantage was first formulated by economist David Ricard as an explanation of the benefits of international trade for countries. His theory concluded that the country could increase its income specializations in certain products and services and their sale on the international market. Businesses can also have a comparative advantage over their competitors resulting from certain assets, skills or geographical and historical factors. For example, industry may be in an area where the workforce specializes in certain skills or agricultural business can be placed in the area of ​​rich soil and favorable climate. The advantages of comparative advantages can also apply to people and give a reason why they should specialize in certain skills than on others. The abole advantage in their production. In other words, although other countries could produce these goods more efficiently, the country should still specialize in certain goods if the cost of their production in this country is lower. Cost of the opportunity JSOU costs for the next best use that could be made from sources devoted to the production of goods. The decision to specialize in goods that produce quite efficiently could help the country to sell more and increase its income.

The advantages of the comparative advantage are that if the country specializes in being relatively most effective, total national production may be and therefore national income may be increased. The country can produce more of these goods than needed and export them to other countries, while using export revenues to buy imported goods and services that are not sold. From the point of view of economists, it moves the limit of its production possibilities externally and therefore increases its national production. Advantages of comparative advantages can therefore result in greater national income.

In the case of a trading company, the benefits of comparative advantages can explain how the company can increase its profits by concentrationFor the production of these goods and services, for which it has a comparative advantage over competitors. This can mean focusing on basic products and basic competences. The company may be more efficient than its competitors in the production of certain items to hold certain advanced tangible assets or valuable intangible assets. For example, a company can own certain patents or know-how, allowing them to streamline their processes or products. Valuable intangible assets could include the introduction of experienced management or qualified workforce.