Overview
Absolute and comparative advantage are fundamental concepts in economics that explain how countries can benefit from trade. Absolute advantage refers to the ability of a country to produce more of a good than another country using the same resources. In contrast, comparative advantage focuses on the...
Key Terms
Example: Country A can produce 10 cars while Country B can only produce 5 with the same resources.
Example: If Country A gives up fewer resources to produce cars than Country B, it has a comparative advantage.
Example: If you spend time studying instead of working, your opportunity cost is the money you could have earned.
Example: Country A trades cars for Country B's electronics.
Example: A country specializing in coffee production can produce it more efficiently than others.
Example: Using resources in a way that produces the most goods and services possible.