In a brief paragraph discuss the difference between absolute and comparative advantage identify an example of how comparative advantage prompts trade.

An absolute advantage is an economic situation in which a seller is able to produce a higher amount of a given product while using the same amount of resources used by competitors to produce a smaller amount.

Whereas Comparative Advantage is specialization and free trade will provide benefits for all parties who trade, although some parties are absolutely more efficient compared to others.

An absolute advantage is an economic situation in which a seller is able to produce a higher amount of a given product while using the same amount of resources used by competitors to produce a smaller amount. This is possible for individuals, companies and even countries to have an absolute advantage in the market. The ability to produce more goods and services more efficiently also allows for more profits, assuming that all units produced are sold.

According to Ricardo's theory called the Comparative Advantage Theory, specialization and free trade will benefit all parties who trade, even though some parties are absolutely more efficient compared to others.

In other words, comparative advantage is the ability of producers to produce goods or services at lower opportunity costs than other producers.

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Absolute Advantage link

Comparative Advantage link

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Class: High School

Subject: Social Studies

Keyword: Absolute, Comparative, Advantage

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