How Do You Spell COMPARATIVE COST PRINCIPLE?

Pronunciation: [kəmpˈaɹətˌɪv kˈɒst pɹˈɪnsɪpə͡l] (IPA)

The Comparative Cost Principle is a basic economic theory that states that countries should specialize in the production of goods in which they have a lower opportunity cost and trade these goods with countries that have a higher opportunity cost of producing them. The spelling of this term, /kəmˈpærətɪv kɒst ˈprɪnsəpl/, is pronounced as "kuhm-par-uh-tiv kost prin-suh-puhl" with emphasis on the second and fourth syllables. Understanding the IPA phonetic transcription helps to accurately spell and pronounce complex terms in economic theory.

COMPARATIVE COST PRINCIPLE Meaning and Definition

1. The comparative cost principle, also known as the law of comparative advantage, is an economic concept that states that entities or nations should specialize in the production and trade of goods or services in which they have a lower opportunity cost, relative to other entities or nations.

   According to this principle, each entity or nation should focus on the production of goods or services that they can produce at a lower cost compared to other goods or services, as long as they can obtain the other goods or services they need at a lower cost from other entities or nations. In other words, it guides entities or nations to allocate their resources efficiently by taking into consideration the relative costs and benefits associated with the production and trade of different goods or services.

   By specializing in the production of goods or services in which they have a comparative advantage, entities or nations can maximize their overall output and economic welfare. This principle is a fundamental concept in international trade, as it provides the basis for determining which goods or services should be produced domestically and which should be imported.

   The comparative cost principle was first introduced by economist David Ricardo in the early 19th century and has since been widely accepted and applied in the field of economics. It is a key factor in explaining the benefits of international trade and why countries engage in trade with each other.

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Plural form of COMPARATIVE COST PRINCIPLE is COMPARATIVE COST PRINCIPLES