how can fruits grown, harvested, transported on the other side of the world to my local grocery… can cost less than 2$. How is this possible?
In: Earth Science
These days, overseas transportation is not expensive. To send a peach from Argentina to Thailand and then to California may cost only a cent or so for a product that may ultimately cost 75 cents, and a shipping container full may cost only $1000 to transport. It costs much more to transport peaches from a port on the pacific to a warehouse in your city by truck than it does to transport it across an ocean, by a factor of approximately 10.
Comparative advantage describes why different countries produce different goods. Perhaps, it costs 10 cents to grow a peach in Argentina and 15 cents to grow it in the USA, while in the USA it costs 3 dollars to grow a bushel of corn and in Argentina it costs 3.50. this could be due to environmental, cultural, legal or infrastructure differences.
In this example, Argentina has a comparative advantage in producing peaches and both countries make more money if the USA only produces corn and Argentina only produces peaches.
Since trade and transportation cost so little, even minor comparative advantage cause industrial and agricultural trade to globalize.
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