Answer to Question #42267 in Macroeconomics for oosha

Question

Distinguish between absolute and comparative advantage

Answer 1

Absolute advantage is used to describe a situation in whicha person, corporate entity or country can produce something at a price that is lower than others. Comparative advantage refers to a situation in which the same type of commodity can be produced with a lower opportunity cost than others. The difference between absolute advantage and comparative advantage lies in the difference between the advantages inherent in the two factors.

Absolute advantage is focused on the advantage of cost, while comparative advantage is based on opportunity cost. Also, absolute advantage provides more benefits in trade than comparative advantage.