Principle of Comparative and competitive advantage in economics and comparison of both the principles is described in the slide through which the reader will able to explore his/her knowledge about the types of advantage in economics.

1. Principle of Comparative
Advantage & Competitive
Advantage
Prepared by:
Sudip Gautam
Agriculture & Forestry University
Chitwan, Nepal 12/19/2019 1

2. Comparative Advantage
• Also known as Relative advantage
• It refers to the ability of a person or nation to produce a good or service at a
lower opportunity cost than another person or nation.
• A trade has a comparative advantage in producing a good if the opportunity
cost of producing that goods in the terms of other good is lower in that
country compared to other countries.
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3. PRINCIPLE OF COMPARATIVE
ADVANTAGE
• According to this principle, different areas will tend to produce those products for which
they have the greatest comparative and not just the absolute advantage.
• The main factors involved in this law are simply an extension and application of principles
of specialization and diversification.
• The physical and economic condition influence production varies from country to country,
religion to religion and farmer to farmer and even within a farm from field to field.
• For instance, farmer in Sarlahi district specialize sugarcane cultivation and those in Dhanusa
district specialize in paddy cultivation .
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4. Table 1.1: Yield per hectare(in quintal) 2012-2014
Crop Dhanusa Sarlahi
Paddy 53.0 31.8
Sugarcane 747.1 912.3
Dhanusa has to give up 53.0 qtls of paddy for 747.1 qtls of sugarcane
whereas Sarlahi had to give up 31.8 qtls of paddy for 912.3 qtls of
sugarcane.
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5. Figure 1: A framework for Comparative Advantage
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6. Competitive Advantage
• It simply means something that places a company or a person above the
competition.
• It refers to the ability gained through attributes and resources to perform at a
higher level than resources in the same industry or market.
• Similarly, a firm is said to have a competitive advantage when it is
implementing a value creating strategy not simultaneously being implanted by
any current or potential player.
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8. Comparison between Comparative & Competitive Advantage
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