Question

when a country has a comparative advantage in the production of a good

Answer 1

Comparison advantage is an economic term that defines when one country produces a product or service at a lower cost relative to another country.

Comparative advantage in the production of a good for a country is actually affected by various factors and they are complex in nature.

Firstly, any country will have a comparative advantage in the production of a good if that good is of natural abundance in that country itself. For example, In Gulf countries like Saudi Arabia, Iran, etc.. fertile fuel reserves make it easier to produce oil and gas at a cheaper rates than any other countries in the world.

Second, the infrastructure and demographics of a country too helps it to gain comparative advantage. For example, India remains a top outsourcing provider due to the significant cost savings that companies can achieve. The cheap labor costs and high level of infrastructure provides India an upper hand over other countries like China, Brazil, etc..

So, any country which has the ability to produce a good at cheaper rate than other countries is said to enjoy comparative advantage of that good. The said country will be able to produce goods at cheaper rates than other countries because of various reasons like abundance of natural resources, cheap labor rates, highly-developed infrastructure, etc...