Comparative advantage drives specialization from "summary" of Principles of Economics by Saifedean Ammous
The principle of comparative advantage in economics is a powerful concept that explains why individuals, businesses, and countries specialize in producing goods and services in which they have a lower opportunity cost. This principle states that even if one party is more efficient in producing all goods than another party, both can still benefit from trade by specializing in their respective areas of comparative advantage. For example, consider two individuals, John and Mary, who can either produce apples or oranges. John can produce either 10 apples or 5 oranges in an hour, while Mary can produce either 8 apples or 4 oranges in an hour. In this scenario, John has an absolute advantage in producing both goods because he can produce more of each in the same amount of time. However, when we compare their opportunity costs, we see that John's opportunity cost of producing one apple is 0.5 oranges, while Mary's opportunity cost ...
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