Question

Why is comparative advantage important to a nations’ economic growth? How might it lead to specialization and growth in GDP? (GDP = total value of all goods and services produced in an economy)

Answer 1

Comparative advantage:

Comparative advantage is an economy's capacity to create a specific good or service at a lower opportunity cost than its exchanging partners.

• A comparative advantage enables an organization to sell goods and services at a lower cost than its rivals and acknowledge more stronger sales margins.
• Opportunity cost basically is the proportion of what we offer up to what we gain.

Gross domestic product(GDP) is the final production value of goods and services that is delivered inside the domestic limit of a nation in a budgetary year.

So when any nation is having a comparitive advantage in a good or service then it will accept less opportunity cost for production and this will result in having specialization in exchange with other nation.

However, if a nation is having comparative advantage, at that point with similar assets it can acquire while utilizing less and at last boosting the nation's GDP.

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