Difference Between Absolute Advantage And Comparative Advantage

For each choice I make, there is an opportunity cost. Opportunity cost is the real cost of an item, what I must give up in order to

Comparative advantage is the concept that production can be conducted with lower opportunity cost than a competitor. The lower cost of

Absolute advantage is the ability to produce more than one product efficiently and at the lowest cost. Comparative advantage is the ability to specialize in producing one product at the lowest cost. Comparative advantage affects trade the most because with specializing in producing one product the companies must trade to receive other products. Comparative advantage also considers the opportunity of cost to produce one product verse the other.

Pretend for a moment that you are much better than your best friend at chopping pineapples and at waxing surfboards for tourists. Economically speaking, you are said to have the absolute advantage over your friend because you are better at both tasks.  An easy way to identify absolute advantage is to see who can produce the most of a good or who can do it in the fastest time as we see in this example.  Absolute advantage is when some individual, group, or country has the ability to produce a product more efficiently than another individual, group, or country.  

Now, say that you and your best friend opened a fruit and surf stand on the local beach. There are two tasks that need to be completed: waxing surfboards for the surfers who stop by and chopping pineapples for a refreshing snack for people at the beach. While you might be better at both jobs, you can still get the work done quicker if you each take on one of the tasks. The question is: who waxes the boards and who chops up the pineapples? Let’s say:

Opportunity cost is when there are multiple options for something and there are two or more that are the best or very, very, opportunity cost is the value of not doing the next best thing. for example Anthony is either going to have a bake sale or work at Arby's, at Arby's he gets a fry and a drink along with 50 % but the bake sale is estimated to make 100$-200$ and costs 50$ so Anthony's opportunity cost for the bake sail is 50$ and some food while the opportunity cost of the Arby's is 50$-150$. For Anthony to make a smart business decision he needs to know which would be more profitable in the long run: food that causes diarrhea or the foothold in the community of being a baker. Another example of opportunity cost is the classic go to college

Absolute advantage is when a country produces more of a certain good and less of another good using the same amount of resources. Countries that practice this method are able to take advantage of an economic opportunity that allows them to work more efficiently. For example if two countries agree to import/export for maximum output it creates an absolute advantage to both parties. The U.S can produce more wheat than China, and China can turn around and produce more electronics than the U.S. This occurs because electronic products are cheaper and are now manufactured in China. The factories are bigger and work faster in terms of demand than those in the U.S. There are countries with environmental limitations and are not able to produce crops,

Comparative advantage states that the division of labor should operate freely, without outside interference, because some countries, people, states, etc., have special advantages over the others, that allows them to produce certain goods more

Opportunity costs are an important aspect to consider when making plans whether to go to college full time or not. An opportunity cost is essentially a decision between two conceivable choices where you judge the advantages of one decision over the other. You can decide to do this or you can decide to do that. I never weighed the scale between college and a job statically, but the result of my choices has affected me greatly.

Which is cost difference determines the patterns of international trade. Absolute advantage is trade benefits when each country is at least cost producer of one of the goods being traded. In the 1800s, David Ricardo developed the theory of comparative advantage to measure gains from trades. This theory is based on comparative advantage and it states each nation should specialize in production of those goods for which its relatively more efficient with a lower opportunity cost.

l. Opportunity cost- a benefit that someone could have gotten but gave it up for an alternative route.

-The opportunity cost of something is what you must give up of one thing, in order to get it. Opportunity cost is a key concept of economics because it is described as expressing the basic relationship between scarcity and choice. Opportunity cost plays a crucial part in ensuring that scarce resources are used efficiently.

In the economic theory, if countries apply the principle of comparative advantage, the combined output will be increased in comparison with the output that would be produced when the two countries tried to become self-sufficient and allocate their own resources towards production of both goods (Comparative advantage, n.d.). If both countries are able to produce goods by using fewer resource, at a lower opportunity cost, they will have comparative advantages (Comparative advantage, n.d.). For instance, when country A gives up on making product 1 and manufactures only product 2, it will have extra 30 units of product 2 with the cost of 30 units of product 1. For country A, the opportunity cost of making a more unit of product 2 is one unit of product 1 that is lower than the opportunity cost of making

Absolute advantage was an idea suggest by Adam Smith in 1817. The theory behind absolute advantage suggests that if a country is highly skilled and efficient in producing a certain good with the fewer resources, then it is believed that a specific country has an absolute advantage in the production of that good (Sloman&Garratt, 2013). However Absolute advantage can only occur if the country using its resources for a specific good/service does so efficiently otherwise no gains are made from trading. Although it can be argued that the idea of Absolute advantage does not particularly make much sense in explaining trade patterns. As said in Feenstra’s and Taylors book, Absolute advantage does not particularly help to explain the case of why the US imports snowboards from places like China

Economists use the term absolute advantage when comparing the productivity of one person, firm or nation with that of another. The producer that requires a smaller quantity of inputs to produce a good is said to have an absolute advantage in producing that good (Gans, King, & Mankiw, 1999).

As absolute advantage does not say much about trade, in order to understand comparative advantage it is important to know the two concepts which are opportunity costs and the production possibility curve. According to Ricardo, comparative advantage exists when a country