A country has an absolute advantage when it can produce the same good using few inputs. If a person in Existan can make 25 tables in 1 hour, and Hypoland manages 24 tables per hour per person, Existan has the absolute advantage.

Unfortunately for Hypoland, countries with an absolute advantage in one area tend to have it in many more. However, this doesn’t matter because resources are finite: there are only so many resources, including hours and people. Here is where comparative advantage makes its entrance.

Existan might produce 25 tables per person per hour, but that same person could instead make four computers in the same amount of time. The Hypoland worker can make only 1.

In one hour, one person:

Existan: 25 tables OR 4 computers Hypoland: 24 tables OR 1 computer

With trade, everybody can benefit if each country sticks to the area in which it has a comparative advantage. In 10 hours, if Existan makes 40 computers and Hypoland makes 240 tables, both are better off. If Existan tried to do both, it would have 125 tables and 20 computers. Hypoland would end up with 120 tables and 5 computers. The total would be 235 tables and 25 computers.

With each country sticking to their lane, the world produces more. In the real world, there are many more countries. There are also uncountably many providable services and possible goods. The world can reach a place where specialisation creates more.

It comes down to opportunity cost: an hour spent on one thing is a choice not to do something else. With countries trading and playing to their comparative advantage, each increases its wealth and uses that to buy the goods made elsewhere.

This realisation has a profound implication: every country benefits from trade - whether they’re the best at everything or nothing.