Comparative Advantage

What is comparative advantage? And why is it important to trade? This video guides us through a specific example surrounding Tasmania — an island off the coast of Australia that experienced the miracle of growth in reverse. Through this example we show what can happen when a civilization is deprived of trade, and show why trade is essential to economic growth.

In an economy with a greater number of participants trading goods and services, there are more ways to find a comparative advantage and earn more by creating the most value for others. Let’s dive right in with an example from our new friends, Bob and Ann. This video is from Don Boudreaux's Trade and Prosperity section of Everyday Economics.