Greece and Italy both produce olive oil and cheese. With the same amount of labour Greece produces 15,000 tonnes of cheese per year and 12,000 barrels of olive oil and Italy produces 25,000 tonnes of cheese and 15,000 barrels of olive oil. Determine and explain the comparative advantage for each country.

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Comparative Advantage and Absolute Advantage Analysis

The theory of absolute advantage was given by Adam Smith in the year 1776.