Relative Cost Advantage

This exists where the absolute cost advantage, specialization could occur by country the cost of production of one commodity, relative to the cost of production commodities in the same country e.g though Uganda has a disadvantage in production of Radios and Cotton, she can produce cotton more efficiently. So, should specialize in the production of cotton and Japan in radios. And if possible should employ most of her abundant resources i.e labour and land in the production of this commodity.

The law of relative cost advantage states that "A country always exports a good that requires more of her abundant resources (factors of production) to produce.