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Why commerce is important?

Updated: 11/2/2022
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9y ago

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In basic economic theory, it is because of revealed comparative advantage (RCA).

If two people can make two products, there is always an RCA such that the two can produce more together if each one specialises. Even if one person is a less efficient producer of both products, it is better for that person to produce what they are less bad at producing and let the better producer concentrate on whatever they have the greater edge on.

By doing so, the two can produce more together than going it alone. Then, they trade - and that is where the commerce comes in. As a result, each person would be better off than trying to be self-sufficient and not trading.

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