- Absolute Advantage:
· National-exists when a country can produce more o a good/ service than another county can in the same time period.
- Comparative Advantage:
-A person or a nation has a comparative advantage in the production of a product when it can produce the product at a lower domestic opportunity cost than can a trading partner.
- Specialization and Trade:
-Gains from trade are based on comparative advantage, not absolute advantage.
- Examples of Output Problem:
- per acre
-miles per gallon
-word per minute
-apple per tree
-television produced per hour
- Examples of Input Problems:
-number of hours to do a job
-number of acres to feed a horse
-number of gallon of paint to paint a house
For output, a nation would have the comparative advantage if it had the lower opportunity cost then the other nation. Whereas for input, the nation with the comparative advantage has the higher opportunity cost than the other.
ReplyDeleteI understand the difference between comparative and absolute advantage very well now. A country has an absolute value when the country who it is being compared to produces less of the product in the same time period. Comparative has to do more with opportunity cost
ReplyDeleteVery informative and nice video! Absolute advantage just means a country produces more of a product than another company. Comparative advantage has to do with the opportunity cost of producing one product over another product.
ReplyDeleteThe comparative advantage poses a natural observation of a nations output or input. IT is clearly sated and well placed in the post!
ReplyDeleteabsolute advantage are for individuals that exists when a person can produce more of a certain good/ service than someone else in the same amount of time. nice post :).
ReplyDelete