No, actually it went over my head the minute I read it.
Thanks, I get it now.
But then, how is it different from absolute advantage? 'Cause in it A country has absolute advantage if it uses lesser resources than another country to produce another product right? The difference confuses me
welcome
,
well Absolute advantage is when Say "country X" & "country Y" are given the same amount of resources & assumed to be @ same technological level.
IF "country X" could produce a product more than "country Y" could produce with the same amount of resources , "country X" is said to have an absolute advantage in Production of that good.
IN comparative advantage like i told u , we do not see if a country could produce more than another country , but we check how much of production of another good is given up in order to produce this product.
lets take a simple example:
Say the US & Chinese Produces Weapons & Toys; given the same amount of resources.
China produces more of both weapons & toys than US. Under the absolute advantage theory these two countries find no advantage in trading.
But suppose China has to give up a lot of toys in order to produce a single weapon & on the other hand US has to give up More weapons to produce a single toy.
These two countris can still trade under comparative advantage theory . US produces Weapons ( as it could produce more weapons by giving up toys rather than the other way around)
China can produce toys because it can produce more toys by giving up weapons.