Absolute Advantage
- Individual- exists when a person can produce more of a certain good/ service than someone else in the same amount of time (or can produce a good using the least amount of resources.)
- National-exists when a country can produce more o a good/ service than another county can in the same time period.
- 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.
Examples of Output Problem:
- word per minute
- miles per gallon
- tons per acre
- apple per tree
- television produced per hour
- number of hours to do a job
- number of acres to feed a horse
- number of gallon of paint to paint a house
Specialization and Trade
Gains from trade are based on comparative advantage, not absolute advantage (who can do what in a certain amount of time)
For more information on absolute & cooperative advantage you watch this video:
https://www.youtube.com/watch?v=Pd_qs8ueIWw
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