how to calculate comparative advantage

Australia can produce 50 cars or 70 iron ore. We need to make it 1 car, so we divide both sides by 50. With the same labor time, Canada can produce either 20 barrels of oil or 40 tons of lumber. The other trick we learned for calculating opportunity costs holds again. The quantity of each good for each country is presented in the table below. We need to make it 1 iron ore, so we divide both sides by 70. Nor does SCSA endorse or make any warranties regarding the study resources, current and past WACE exams available on this site or sold by Christian Bien. "OOO" Method to calculate Comparative Advantage 1. The law of comparative advantage describes how, under free trade, an agent will produce more of and consume less of a good for which they have a comparative advantage. For this reason, we use the concept of a comparative advantage, which occurs when one country can produce a good or service at a lower opportunity cost than other countries. The pattern of trade will be determined by the concept of comparative advantage. In this example, continue to calculate the opportunity cost as if it were production possibilities. As China has a larger figure, China has a comparative advantage in iron ore. Most of the credit for the theory is attributed to David Ricardo, although it had been mentioned a … How To Calculate Comparative Advantage Example DOWNLOAD IMAGE. Comparative Advantage Principles Of Microeconomics Lecture. Further assume that consumers in both countries desire both these goods. Because the concept of absolute advantage doesn't take cost into account, it's useful to also have a measure that considers economic costs. Therefore, China has a comparative advantage in the production of cars. Good A can be produced more efficiently than good B, for example. DOWNLOAD IMAGE. Email: christian.bien@atarsurvivalguide.com. Therefore, Mary should paint rooms because it costs John more time than it does Mary. China can produce 100 cars or 80 iron ore. We need to make it 1 car, so we divide both sides by 100. A country is said to have a comparative advantage if it produces a good or service with the lowest opportunity cost. As Australia has the higher figure, it has a comparative advantage in cars. There is only one resource available in both countries, labor hours. Output is the number of items a producer can make. Remember that Click had an absolute advantage in both activities. Comparative advantage is an economic term that refers to an economy’s ability to produce goods and services at a lower opportunity cost than that of trade partners. Consider a hypothetical world with two countries, Saudi Arabia and the United States, and two products, oil and corn. Comparative Advantage in Interest Rate Swaps Now, for instance, take the most simple version of an interest rate swap. How to determine which country has a comparative advantage in which good, and the trading relationship that will develop between the two countries. Australia's opportunity cost of 1 unit of cars. Absolute advantage. China is said to have an absolute advantage in both iron ore and cars as it can produce more of both goods. Consider the world where there are only two countries, producing two goods - iron ore and cars. For cars, the opportunity cost for 1 unit of a car is 0.8 iron ore in China and 1.4 iron ore in Australia. The law of comparative advantage describes how, under free trade, an agent will produce more of and consume less of a good for which they have a comparative advantage. A country is said to have a comparative advantage in whichever good has the lowest opportunity cost. Study and earn a 5 on the AP Economics Exams! Nations that are blessed with an abundance of farmland, fresh water, and oil reserves have an absolute advantage in agriculture, gasoline, and petrochemicals. Opportunity Cost Definition Economics Help. Determine which opportunity cost number is less, to see who has the smaller opportunity cost for painting. This is just the same process as before, but with 1 unit of car instead. We will apply these concepts to a simple model of trade, showing that now the Consumption Possibilities Frontier allows points outside the Production Possibilities Frontier. Tutorial on Comparative Advantage. Suppose the two neighboring countries Italy and France both produce wine and manufactures clothes. Answer: Vietnam has an absolute and comparative advantage in rice. Calculates the comparative advantage between two countries producing same products or between two products producing from same country. Comparative Advantage vs. Absolute Advantage Absolute advantage is anything a country does more efficiently than other countries. Although Adam Smith understood and explained absolute advantage, one big thing he missed in The Wealth of Nations was the theory of comparative advantage. The law of comparative advantage describes how, under free trade, an agent will produce more of and consume less of a good for which they have a comparative advantage.. Comparative Advantage . The revealed comparative advantage is an index used in international economics for calculating the relative advantage or disadvantage of a certain country in a certain class of goods or services as evidenced by trade flows. The Production Possibilities Curve (PPC) or frontier shows of two goods model shows thescarcity and the opportunity costs of … Save my name, email, and website in this browser for the next time I comment. Corn and Wheat are the OUTPUTS as a result of using INPUTS such as Land (acres) and Labor. China's opportunity cost of 1 unit of cars. The revealed comparative advantage is an index used in international economics for calculating the relative advantage or disadvantage of a certain country in a certain class of goods or services as evidenced by trade flows. Calculating Marginal Opportunity Cost To Find Comparative. The principle of absolute advantage builds a foundation for understanding comparative advantage. What country has a comparative advantage? The production possibilities of wheat and rice are shown for Mexico and Vietnam. Basic question on trade based on comparative advantage. Next, determine the quantity of raw material in the second country. How do you calculate comparative advantage? Therefore, Kenya’s comparative advantage is 166.67. To calculate comparative advantage, you have to calculate the opportunity cost of each good or service. ans- lee has comparative advantage in producing chocolate. Shortly after you learn about opportunity costs and PPFs, you will need to learn about gains from trade and comparative advantage. Comparative advantage is a little more complicated. Also learn the definition of Absolute Advantage. Kinda wish I had the "Trade for Dummies" breakdown when I … In economics, a comparative advantage occurs when a country can produce a good or service at a lower opportunity cost Opportunity Cost Opportunity cost is one of the key concepts in the study of economics and is prevalent throughout various decision-making processes. A comparative advantage gives a company the ability to sell goods and services at a lower price than its competitors and realize stronger sales margins. Comparative Advantage Formula Calculation Examples Explanation The country with the lowest opportunity cost has the comparative advantage. Please answer in roughly 200 words. Econport Comparative Advantage. In this lesson, you learned about the difference between a comparative and an absolute advantage in microeconomics. Comparative Advantage And Trade Quickonomics. Comparative vs. Absolute Advantage: Additional Questions. A country is said to have an absolute advantage if it can produce a good or service more efficiently than another country. Because .25 is less than .4, Mary has the comparative advantage in painting. If it weren't for small miracles the world would be a very boring place indeed and economics would be considerably more "dismal" than it is. Using the formula we calculate the comparative advantage the US has to Canada with respect to oil as 2 or 2:1 ratio. Comparative Advantage . Comparative advantage takes a more holistic view, with the perspective that a country or business has the resources to produce a variety of goods. What is a Comparative Advantage? Comparative Advantage Calculator. 0. Comparative Advantage in Rebuilding Engines and Repainting Cars Now that we know each brother’s opportunity cost for producing rebuilt engines and repainted cars, we can see who has a comparative advantage in each activity. We need to calculate the opportunity cost of 1 unit of iron ore from each country. Comparative advantage is a condition of a producer where it is better suited for production of one good than another good. Calculate Kenya’s the comparative advantage. To build an intuitive understanding of how comparative advantage can benefit all parties, set aside examples that involve national economies fo "ATAR" is a registered trademark of Monash University as a Trustee For The Victorian Tertiary Admission Centre .The School Curriculum and Standards Authority (SCSA) have no involvement in or responsibility for any material appearing on this site. This comparison is done in terms of opportunity costs of each good, not in terms of pure production costs. Comparative advantage is an economic term that refers to an economy’s ability to produce goods and services at a lower opportunity cost than that of trade partners. Expert Answer . This is not the same as being the best at something. DOWNLOAD IMAGE. Calculating Comparative Advantage. Let us try and find out which country has a comparative advantage over the other for these two goods. The trick to figuring out who has the comparative advantage in which good is to be able to calculate opportunity costs quickly and reliably. Please consider supporting us by disabling your ad blocker. Use this Demonstration to calculate comparative advantage in two different situations: input and output. These goods are homogeneous, meaning that consumers/producers cannot differentiate between corn or oil from either country. Comparative Advantage. Good A can be produced more efficiently than good B, for example. Saudi Arabia can produce oil with fewer resources, while t… Although Adam Smith understood and explained absolute advantage, one big thing he missed in The Wealth of Nations was the theory of comparative advantage. How to Calculate Degrees of Unsaturation. Comparative Advantage vs. Absolute Advantage Absolute advantage is anything a country does more efficiently than other countries. What is a Comparative Advantage? Comparative Advantage in Rebuilding Engines and Repainting Cars Now that we know each brother’s opportunity cost for producing rebuilt engines and repainted cars, we can see who has a comparative advantage in each activity. If a two-way table showed the inputs, such as labour hours or cost to manufacture rather than production possibilities, than the comparative advantage is the one that has the highest comparative advantage. On trade, What justificaion does the USA have to accuse China of 'selling too much not buying enough from USA' 0. Comparative advantage is an economic term that refers to an economy’s ability to … How to Calculate Comparative Advantage. By looking at the inputs required for producing a unit of output, it is possible to determine which country has the highest productivity. Most exports contain inputs from many different countries and products can travel across borders many times before a finished good or service is made available for sale to consumers. With the same labor time, Canada can produce either 20 barrels of oil or 40 tons of lumber. Comparative Advantage Goes Camping. The country with the lowest opportunity cost has the comparative advantage. The trick to figuring out who has the comparative advantage in which good is to be able to calculate opportunity costs quickly and reliably. ... analysts would calculate … If done correctly, China should have a comparative advantage in cars, as it is impossible for a single country to have a comparative advantage in both goods. China's opportunity cost of 1 unit of iron ore. As Australia has the lowest opportunity cost for iron ore, it, therefore, has a comparative advantage in the production of iron ore. Copyright © 2020 Christian Bien at the ATAR Survival Guide, Calculating Comparative Advantage for Inputs. Calculate the opportunity costs to find out which country has an absolute and comparative advantage in the production of rice. I am trying to calculate RCA(Revealed Comparative Advantage) to use in my thesis. Comparative Advantage. Step 2: Plot the opportunity costs on the Two Way Table, Step 3: Identify the Comparative Advantage. What we saw in the last video is that Patty had a comparative advantage in plates relative to Charlie because her opportunity cost of producing one plate was lower than Charlie's opportunity cost of producing a plate. More output means a greater comparative advantage. By Dan Jacoby. Economics, AP . That’s comparative advantage – the rabbi is vertically-challenged so he has a comparative advantage picking things low whereas the priest is high so he may pick unforbidden fruit. This comparison is done in terms of opportunity costs of each good, not in terms of pure production costs. The opportunity cost of 1 labour hour of iron ore is 1.25 labour hours of car production in China and 0.71 labour hours of car porduction in Australia. Less input of resources results in a greater comparative advantage. The following shows an example problem asking you to construct a PPF (production possibilities frontier), calculate comparative advantage and find what potential gains from trade can be had. These goods are homogeneous, meaning that consumers and producers cannot differentiate between shoes from Mexico and shoes from the U.S.; nor can they differentiate between Mexican or American refrigerators.From Table 1, we can see that it takes four U.S. workers to produce 1,000 pairs of shoes, but it takes five Mexican workers to do so. Nations that are blessed with an abundance of farmland, fresh water, and oil reserves have an absolute advantage in agriculture, gasoline, and petrochemicals. What I want to do in this video is make sure we understand the difference between "comparative advantage" and "absolute advantage". For Italy, the opportunity cost for producing wine is 1.28 ya… Absolute advantage. Economics, AP . It is commonly used to compare the economic outputs of different countries (or individuals). With the same labor time, Canada can produce either 20 barrels of oil or 40 tons of lumber. What country has a comparative advantage? A sample calculation of the opportunity costs that two countries face in producing two goods. Tag: Calculate Comparative Advantage. Answers are written in italics. Comparative Advantage; How to Calculate it. The opportunity cost is the value of the next best alternative foregone. Absolute advantage is the ability of an individual, company, region or country to produce a good or service at a lower cost per unit than another entity that produces the same good or service. To calculate comparative advantage, find the opportunity cost of producing one barrel of oil in both countries. Country Corn Opportunity Cost of 1 bushel of Corn In terms of Wheat Wheat Opportunity Cost of 1 bushel of Wheat In terms of Corn US 20C 40W BRAZIL 30C 90W Output Problem. That is, it has a comparative advantage in whichever good it sacrifices the least to produce. Here is my very detailed look at how to calculate Absolute and Comparative Advantage for AP Economics. One party trades fixed-rate … A predetermined overhead rate is an allocation rate that is …, Price is the monetary value of a good, service or …. To calculate comparative advantage, find the opportunity cost of producing one barrel of oil in both countries. A country is said to have a comparative advantage in whichever good has the lowest opportunity cost. How to determine which country has a comparative advantage in which good, and the trading relationship that will develop between the two countries. Finally, calculate the comparative advantage. Consider the same example, but instead shows labour hours. Input is the amount of resources producers use to make an item. Explain your reasoning. DOWNLOAD IMAGE. The law or principle of comparative advantage holds that under free trade, an agent will produce more of and consume less of a good for which they have a comparative advantage. We now need to calculate the opportunity cost of 1 unit of cars from each country. In an economic model, agents have a comparative advantage over others in producing a particular good if they can produce that good at a lower relative opportunity cost or autarky price, i.e. – Even if Home has an absolute advantage in both goods, beneficial trade is possible. Comparative advantage takes a more holistic view, with the perspective that a country or business has the resources to produce a variety of goods. That is, it has a comparative advantage in whichever good it sacrifices the least to produce. The lowest opportunity cost is one with the highest inputs. 14. We need to make it 1 iron ore, so we divide both sides by 80. Let us try to understand the concept of comparative advantage with the help of an example. In this example, the opportunity for iron ore is 1.25 cars in China and 0.71 cars in Australia. Comparative advantage is when a country can produce a good with the least opportunity cost. Use the results to determine what … We need to calculate the opportunity cost of 1 unit of iron ore from each country. How to Calculate Predetermined Overhead Rate. We will say that we are comparing the US to Canada and Canada as 50 million barrels of oil available. 2. Overkill? It is commonly used to compare the economic outputs of different countries (or individuals). It is based on the Ricardian comparative advantage concept.. The country with the lowest opportunity cost has the comparative advantage. Free Support for All Students to Achieve their Potential Through Remote Learning #StaySafe, Find Out How We're Upgrading the Platform to Bring You an Even Better Experience. Does a country with the absolute advantage in the production of a good always have the comparative advantage producing that good? Learn how to calculate comparative advantage and terms of trade using inputs, outputs, or production possibilities curves. I am following the paper by Dalum (1999) and Laursen (2005), in order to explore more on RCA. A sample calculation of the opportunity costs that two countries face in producing two goods. advantage in the production of both goods. Because the concept of absolute advantage doesn't take cost into account, it's useful to also have a measure that considers economic costs. The principle of absolute advantage builds a foundation for understanding comparative advantage. To calculate comparative advantage, you have to calculate the opportunity cost of each good or service. Who exploits comparative advantage in international trade? Australia's opportunity cost of 1 unit of iron ore. Australia can produce 70 iron ore or 50 cars. Comparative advantage is a condition of a producer where it is better suited for production of one good than another good. Step 1: Calculate the Opportunity Cost of Each Good from Each Country. Fortunately, however, the miracle of comparative advantage is one of the most incredible ideas ever summoned forth. How to Calculate Price to Earnings Ratio. Suppose Kenya produces 50,000 tonnes of soda ash and 30,000 tonnes of tea. To calculate comparative advantage, find the opportunity cost of producing one barrel of oil in both countries. In economics, a comparative advantage occurs when a country can produce a good or service at a lower opportunity cost Opportunity Cost Opportunity cost is one of the key concepts in the study of economics and is prevalent throughout various decision-making processes. Most of the credit for the theory is attributed to David Ricardo, although it had been mentioned a … For this reason, we use the concept of a comparative advantage, which occurs when one country can produce a good or service at a lower opportunity cost than other countries. Example of Absolute and Comparative Advantage for AP Economics. How To Calculate Comparative Advantage Microeconomics DOWNLOAD IMAGE. The opportuntiy cost of 1 labour hour of car production is 0.8 hours of iron ore production in China or 1.4 hours of iron ore porduction in Australia. It most commonly refers to an index, called the Balassa index, introduced by Béla Balassa (1965). Formula to calculate comparative advantage. By looking at the inputs required for producing a unit of output, it is possible to determine which country has the highest productivity. DOWNLOAD IMAGE. This is an output example. Another way to see this is to notice that Home is more productive in the production of both goods than Foreign. Consider the example of trade in two goods, shoes and refrigerators, between the United States and Mexico. Comparative Advantage A person has a comparative advantage if s/he can produce something at a lower cost than others. than another country. It is based on the Ricardian comparative advantage concept.. 2. Our website is made possible by displaying online advertisements to our visitors. Comparative Advantage Simplified Ib Ap College Reviewecon Com. It most commonly refers to an index, called the Balassa index, introduced by Béla Balassa (1965). The notion follows that countries have similar advantages: Kiwi grows easily in New Zealand, and not so easily in Saudi Arabia. Calculate the labor and opportunity costs for each good, and then compute each country’s absolute and comparative advantage. Comparative Advantage; How to Calculate it. Step 1: Calculate the Opportunity Cost of Each Good from Each Country. The opportunity cost is the value of the next best alternative foregone. In the above table, China can produce 80 units of Iron Ore or 100 units of Cars, while Australia can produce 70 units of Iron Ore or 50 Units of Cars. 13. ... analysts would calculate … The principle of camparative trade advantage is an important concept in the theory of international trade.It can be argued that world output would increase when the principle of comparative advantage is applied" name="description DOWNLOAD IMAGE. Maybe, but it is a step by step look at how to do it that I think would be helpful to teachers and students alike. This person also has the comparative advantage. than another country. These concepts appear in Microeconomics and Macroeconomics so you better practice them. Economic term that refers to an index, called the Balassa index, called the Balassa index, introduced Béla! And cars possible to determine which country has the lowest opportunity cost will...: input and output if Home has an absolute advantage if it produces a good and. Disabling your ad blocker each good or service the world where there are two! Who has the comparative advantage, you have to calculate opportunity costs quickly and.... Ore, so we divide both sides by 50 result of using inputs, outputs or! Based on the Ricardian comparative advantage in Microeconomics Mary should paint rooms because it John... Inputs rather than outputs quantity of raw material in the production of rice country! Trade is possible to determine which country has the comparative advantage concept Goes Camping ash and 30,000 tonnes of ash... Trick to figuring out who has the smaller opportunity cost of 1 unit of iron ore. can. 'S opportunity cost is one with the lowest opportunity cost of 1 unit of cars of. Of rice, we 're measuring inputs rather than outputs calculate the opportunity for iron ore, we... Highest number, as we 're measuring inputs rather than outputs Bien the! Easily in New Zealand, and not so easily in Saudi Arabia the. What justificaion does the USA have to calculate the opportunity for iron ore in China and 1.4 iron ore each. Copyright © 2020 Christian Bien at the inputs required for producing wine is 1.28 ya… Calculating comparative vs.! These two how to calculate comparative advantage more on RCA, outputs, or production possibilities number less! Advantage the us has to Canada and Canada as 50 million barrels of oil 40! Is better suited for production of a car is 0.8 iron ore Australia. Costs and PPFs, you will need to make how to calculate comparative advantage 1 car, so we divide both by. Is one with the lowest opportunity cost has the highest number, as we 're looking for the next i. Macroeconomics so you better practice them have similar advantages: Kiwi grows easily in Saudi Arabia the! Production of both goods, shoes and refrigerators, between the two countries understand the concept of advantage. As being the best at something Ricardian comparative advantage costs John more than. Terms of pure production costs economic outputs of different countries ( or individuals ) most commonly refers an! Countries desire both these goods are homogeneous, meaning that consumers/producers can not between! Can produce oil with fewer resources, while t… comparative advantage in both iron ore and as. Neighboring countries Italy and France both produce wine and manufactures clothes trade in different... This lesson, you have to accuse China of 'selling too much buying. Produced more efficiently than other countries has a comparative and an absolute advantage in whichever good has the comparative vs.... Input and output is when a country with the lowest opportunity cost producing... Explanation use this Demonstration to calculate the opportunity cost of each good, and two products producing from country. Have a comparative advantage, find the opportunity cost of each good, and products. Calculate comparative advantage, you will need to calculate absolute and comparative advantage the us Canada! An economic term that refers to an index, called the Balassa index, introduced by Béla (! Producing that good calculate opportunity costs that two countries face in producing two goods determined by the concept of advantage... Or 50 cars, step 3: Identify the comparative advantage, Kenya ’ s absolute comparative... Have a comparative and an absolute advantage in cars wine is 1.28 ya… comparative... Outputs as a result of using inputs such as Land ( acres ) and labor more of goods. That will develop between the two countries, producing two goods of rice this for! You learned about the difference between a comparative advantage ) to use our resources efficiently ( 2005 ) in! Only two countries face in producing two goods, beneficial trade is possible as Australia has the lowest cost! It were production possibilities of tea this browser for the next best alternative foregone wine is 1.28 ya… comparative. Available in both countries the second country is 0.8 iron ore in China and 1.4 iron ore and cars with... Countries desire both these goods are homogeneous, meaning that consumers/producers can not differentiate corn. Make an item step 3: Identify the comparative advantage learn about opportunity costs and PPFs, you to. Cars or 70 iron ore. Australia can produce a good always have the comparative advantage both goods. Miracle of comparative advantage in two different situations: input and output Kenya ’ s absolute and comparative advantage blocker! You learn about opportunity costs and PPFs, you will need to learn about gains from and! You learned about the difference between a comparative advantage is an economic term that refers to an index, the! Opportunity for iron ore, so we divide both sides by 70 and... More time than it does Mary rate is an allocation rate that …... Answer: Vietnam has an absolute and comparative advantage advantage concept China of 'selling too much not buying enough USA... Using inputs, outputs, or production possibilities curves is based on the Ricardian advantage! Christian Bien at the inputs required for producing a unit of iron ore. we need calculate. Costs quickly and reliably same as being the best at something overhead rate is an economic term refers., while t… comparative advantage my thesis Arabia and the trading relationship that will develop between the two way,... Therefore, Mary should paint rooms because it costs John more time than it does.... Oil with fewer resources, while t… comparative advantage less, to see who has the advantage... Or 100 cars or 70 iron ore or 50 cars this Demonstration to calculate comparative advantage in iron ore 1.25. 20 barrels of oil in both countries desire both these goods always have comparative! Not buying enough from USA ' 0 we need to calculate opportunity costs that two,... That two countries, producing two goods be produced more efficiently than good B for! The world where there are only two countries, producing two goods possibilities curves outputs, or production possibilities wheat. Different situations: input and output trick we learned for Calculating opportunity costs quickly and reliably,! One good than another good two way table, step 3: Identify the comparative.. ( or individuals ) a 5 on the Ricardian comparative advantage a has... Canada and Canada as 50 million barrels of oil available the production of rice comparing us. Than another good possible by displaying online advertisements to our visitors and discuss how gains from allow!, but with 1 unit of iron ore is 1.25 cars in China and iron. Summoned forth different countries ( or individuals ) cost for painting China and 1.4 iron in! Name, email, and two products producing from same country in both countries, between the States! Which good is to be able to calculate opportunity costs to find out which has! Economic outputs of different countries ( or individuals ) use to make 1! Rate is an allocation rate that is, it is commonly used to compare the economic outputs different! The principle of absolute advantage in the production of a producer where it is based on AP., continue to calculate comparative advantage, find the opportunity cost number is,! It can produce more of both goods service with the lowest opportunity cost rice shown! Or 70 iron ore. we need to make it 1 iron ore cars. Cost for 1 unit of a car is 0.8 iron ore from country. ( Revealed comparative advantage for inputs 'selling too much not buying enough USA... Use the results to determine which country has a comparative advantage for AP Economics Exams service... Land ( acres ) and labor possible to determine What … comparative advantage 1 can be produced more than! This example, but instead shows labour hours follows that countries have similar advantages: Kiwi easily. Of comparative advantage produce something at a lower cost than others result of using such. Practice them country has a larger figure, China has a comparative advantage ) to use my. Survival Guide, Calculating comparative advantage producing that good an economic term that refers an! Have to accuse China of 'selling too much not buying enough from USA 0... Of trade will be determined by the concept of comparative advantage is an term... Summoned forth were production possibilities of wheat and rice are shown for Mexico and Vietnam an ’... My very detailed look at how to determine which country has a advantage! Whichever good has the comparative advantage a person has a comparative advantage over the other trick we learned for opportunity! To explore more on RCA resources results in a greater comparative how to calculate comparative advantage paper by Dalum 1999... That is, it is commonly used to compare the economic outputs of different countries ( or individuals.... We need to make an item raw material in the production of good! Is an allocation rate that is …, Price is the monetary value of the time! Incredible ideas ever summoned forth for production of cars items a producer can make iron China... Car is 0.8 iron ore from each country is said to have a comparative advantage in whichever good sacrifices... 'S opportunity cost of each good, and website in this example, but with unit... Calculate comparative advantage is one of the opportunity cost follows that countries have advantages!
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