Comparative Advantage

The ability to produce an additional unit of a good or service at a lower opportunity cost relative to other nations.

For example suppose there was an economics professor and a maid. Suppose the economics professor worked her way through school by cooking at diners and cooks better than her maid. If she is better at both teaching economics and cooking than her maid, then she has an absolute advantage over her maid.

To review, opportunity cost is what you give up by making choices that you do. In the case of the maid and the economics professor, if the economics professor does her own cooking, she must give up at least some of her classes which can earn her more money. On the other hand, if she delegates the cooking, she will pay the maid only a small fraction of the money she would earn teaching extra classes. As such her maid has a comparative advantage at cooking because the maid has a lower opportunity cost of doing the cooking than the economics professor.
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