Read the Wikipedia article on comparative advantage I linked to above. From the first example:
Two men live alone on an isolated island. To survive they must undertake a few basic economic activities like water carrying, fishing, cooking and shelter construction and maintenance. The first man is young, strong, and educated. He is also faster, better, and more productive at everything. He has an absolute advantage in all activities. The second man is old, weak, and uneducated. He has an absolute disadvantage in all economic activities. In some activities the difference between the two is great; in others it is small.
Despite the fact that the younger man has absolute advantage in all activities, it is not in the interest of either of them to work in isolation since they both can benefit from specialization and exchange. If the two men divide the work according to comparative advantage then the young man will specialize in tasks at which he is most productive, while the older man will concentrate on tasks where his productivity is only a little less than that of the young man. Such an arrangement will increase total production for a given amount of labor supplied by both men and it will benefit both of them.
I realize I should probably have just quoted the above rather than dancing around the topic for two comments. My apologies.
Read the Wikipedia article on comparative advantage I linked to above. From the first example:
I realize I should probably have just quoted the above rather than dancing around the topic for two comments. My apologies.
That makes sense… I’ve got to try and figure out while things aren’t so rosy in a real market, then.