Comparative Advantage
The ability to produce a good or service at a lower opportunity cost than competitors.
What is Comparative Advantage?
Comparative advantage is the economic principle that a country (or individual) should specialize in producing goods where its opportunity cost — the value of the next-best alternative forgone — is lowest, even if it could produce everything more efficiently than its trading partner. Developed by David Ricardo in 1817, comparative advantage is the theoretical foundation for free trade: by specializing and trading, both countries can consume more than they could in isolation. It differs from absolute advantage, which simply compares productivity levels without accounting for opportunity cost.
Example
Country A produces 10 computers or 20 tons of wheat per worker. Country B produces 2 computers or 8 tons of wheat. Country A has an absolute advantage in both, but Country B's opportunity cost for wheat is lower (1 computer vs. 0.5 for A). Each country gains by specializing: A in computers, B in wheat, then trading.
Source: Ricardo, D. — On the Principles of Political Economy and Taxation (1817)