Comparative Advantage.

In developed countries, individuals specialize in the production of certain goods or services. In most cases, the specialty is for small businesses. It’s as if someone is drawing a car assembly line, someone is assembling a car seat and checking the last wheel. But we do not see a single person doing all these tasks alone, when one of these workers wants some kind of good or service other than what he is good at; He buys that good from a producer, or pays someone for people’s repair services like personal computers or phones. But we find this in developed countries, so what about poor countries? In most cases; In poor countries, a person produces his own food, sews clothes, paints his house, and often does not need anyone to provide any goods or services, But why do these people only need one who can produce their own goods and services? Do they produce for their own needs instead of buying from others because they were poor in the first place? Or did their refusal to buy it cause this poverty? So we can answer the question; We need to know the principle of “comparative advantage” in Ricardian economics (according to British economist David Ricardo in 1817). The principle of comparative advantage discusses the benefits that trade-offs based on specialization in the production of goods and services can bring to all people or countries. His work was published in 1776 (The Wealth of Nations); This is by the example of his button factory and how production could be produced at a very high rate if each worker specialized in a particular production process instead of making buttons from start to finish for a spike. Economies based on specialization and trade are generally more productive than less specialized economies due to their comparative advantage. A person has a comparative advantage in producing a particular good or service if that person is relatively more efficient in producing that good or service than others; That is, the opportunity cost of producing that good for that person is less than the opportunity cost of producing the same good for others. On the other hand, if the quantity of a particular good produced by one person using finite resources is greater than the quantity of the same good produced by others using the same resources; We can say that this person has an absolute advantage in producing that good. The meaning of the opportunity cost: If Samir wanted to sew two pants, he would have to give up on fixing two It has also been said, repairing a bike takes twice as long as it takes to sew two. As for Romy, the opportunity cost of producing a pair of pants is to fix a bike. Now suppose that Samir and Rami work 8 hours a day and the daily demand for clothes is 16 pairs of pants, if Samir produces pants half the day and repairs bikes the other half; It makes 12 pairs of pants and repairs 24 bikes. Produce the remaining four pairs of pants; Lamy has to spend two hours sewing and the rest of the time fixing bikes; That is, he would end up making 4 pairs of pants and fixing 12 bikes. In this example, if he wasn’t a specialist, the total would be 16 pairs of shorts and 36 bikes. However, if each of them specializes in the service in which they have a comparative advantage; Ramy alone can produce 16 pairs of pants, and Samir can repair 48 bikes, the comparative advantage-based specialization produces 12 more bikes than the previous case vehicle. This example shows that overall productivity increases when everyone relies on specialization based on comparative advantage rather than trying to be self-sufficient, and shows how benefits can be achieved through trade. So ; The principle of comparative advantage (or comparative advantage, or comparative advantage) can be said to be: when each person (or country) focuses on the activity at the lowest opportunity cost for him (her), the probability is that everyone will do so. benefit. This does not mean that everyone should specialize and never be selfish; No entire country (or individual) specializes in the production of a single good, but this hadith only emphasizes that in case of scarcity of resources (such as life itself) higher economic efficiency can be achieved through specialization that depends on the merit data, and relativity requires a difference in opportunity cost Alternate between people or countries. In the second part of this article, we will discuss the sources of comparative advantage and the production possibilities curve (PPC), which will allow us to visualize how everyone will benefit, while discussing the characteristics of this curve.

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