What is the relationship between specialization and comparative advantage?

Specialization and comparative advantage are separate but related concepts. The comparative advantage concerns a situation in which two entities can produce similar products, but one entity can have an advantage over the other due to lower production costs or other identified factors. The specialization concerns a situation where the entity decides to focus on the production of items due to several perceived benefits and benefits. Therefore, specialization and comparative advantage apply because a company that has a comparative advantage in the production of a particular item may decide to specialize in the production of this item.

Specialization illustrations and comparative advantages can be seen if two companies located in different countries produce similar items. Assuming that the item is orange juice and the ground and produces a huge number of oranges, while Earth B must expand its weaker production with imported oranges, then the company in the country Amá comparative advantage. The reason why society has in a country andA comparative advantage is that it can produce oranges for cheaper costs than it can be in the country B.

In this sense, the company in the country and can decide to specialize in the production of orange juice because it has a comparative advantage because of easy access to raw materials. This reduces expenditure and logistics related to import oranges. The relationship between specialization and comparative advantage is mainly due to the fact that specialization could be a natural consequence of identified comparative advantages.

Another way to identify a comparative advantage is the analysis of the cost of the opportunity for the production of commodity. For example, if ACB Company and XYZ are produced by body lotion through the second, through the second, they can be found through an analysis of the opportunity to produce these two items. If ABC produces body milk for $ 12 for a container and produceIt is a body powder for $ 3 for a container, then the cost of making body milk is 9 or three glasses of powder. If xyz produces body milk per $ 10 and powder for $ 5, then its occasional cost of making body milk is $ 5 or one vessel of powder. Obviously, ABC should have a comparative advantage in powder production and should specialize in this production, while XYZ should specialize in the production of body milk.