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How to Calculate Comparative Advantage.
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How to Calculate Comparative Advantage.

Rosemary Njeri

Comparative advantage is an economic term that refers to an economy’s ability to produce goods and services at a lower opportunity cost than that of trade partners.

The law of comparative advantage describes how, under free trade, an agent will produce more of and consume less of a good for which they have a comparative advantage.

Formula to calculate comparative advantage.

Calculate Comparative Advantage.

Example:

Suppose Kenya produces 50,000 tonnes of soda ash and 30,000 tonnes of tea. Calculate Kenya’s the comparative advantage.

Calculate Comparative Advantage.

Therefore, Kenya’s comparative advantage is 166.67.

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