What's The Difference Between Comparative Advantage To Absolute Advantage?


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Comparative advantage is the ability of a country to produce a good better than the other countries. Even though, others might be able to produce it but you are better. Secondly, the opportunity cost of the country with a comparative advantage is lower. This means that if the country had invested these resources elsewhere, they would not have been able to achieve this efficiency. Comparative advantage theory says that to be efficient, the country should produce only those goods in which it has a comparative advantage while import the other goods.

On the other hand absolute advantage does not incorporate the concept of opportunity costs into it and it says that if you give the same resources to all the countries, the one that produces the highest number of goods has absolute advantage. It does not consider the opportunity cost of the resources.

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