Note: This is post #33 in a weekly video series on basic microeconomics.
Comparative advantage explains why people trade and what goods they should trade. To illustrate the concept of comparative advantage, Marginal Revolution University’s Alex Tabarrok asks, “Should Martha Stewart iron her own shirts?” Even if Martha Stewart has an absolute advantage in ironing shirts, her opportunity cost is simply too high.
(If you find the pace of the videos too slow, I’d recommend watching them at 1.5 to 2 times the speed. You can adjust the speed at which the video plays by clicking on “Settings” (the gear symbol) and changing “Speed” from normal to 1.25, 1.5 or 2.)
Previous in series: What is comparative advantage?