The theory of comparative advantage A country has a comparative advantage when it can produce a good at a lower opportunity cost than another country; alternatively, when the relative productivities between goods compared with another country are the highest. It can be argued that world output would increase when the principle of comparative advantage is applied by countries to determine what goods and services they should specialise in producing. This is … The concept of comparative advantage was first formulated by economist David Ricardo as an explanation of the benefits of international trade for countries. Comparative advantage is a term associated with 19th Century English economist David Ricardo.. Ricardo considered what goods and services countries should produce, and … Comparative vs Competitive Advantage. Comparative and competitive advantage are similar to each other in that comparative advantage is a component of competitive advantage, and both these comparative and competitive advantage play an important role in decision making. comparative advantage concept, which recently becomes dynamic one. is perhaps the most important concept in international trade theory. Absolute advantage describes the overall ability of a country to produce a good better and with fewer resources than another country. Businesses also may have a comparative advantage over their competitors … Some economists argue that a country’s comparative advantage is dynamic, instead of static. Comparative advantage. The theory of comparative advantage is similar and related to that of absolute advantage, but the two economic concepts are definitely distinct. His theory concluded that a country could increase its income by specializing in certain products and services and selling these on the international market. The theory of absolute cost advantage rejected the theory of Mercantilism, whereas the theory of comparative advantage is a development over the theory of absolute cost advantage. So far, the dynamic theory of comparative advantage has put greater attention on the changes in supply (production) side.