Macroeconomics Unit VII: Absolute Advantage & Comparative Advantage

ABSOLUTE ADVANTAGE & COMPARATIVE ADVANTAGE

Absolute Advantage

• individual: exists when a person can produce more of a certain good or service than someone else can in the same amount of time
• national: exists when a country can produce more of a good or service than another country can in the same time period

Comparative Advantage

• individual/ national: exists when an individual or nation can produce a good or service at a lower opportunity cost than can another individual or nation
• input: what can be produced using the least amount of resources, land, or time; chosen item over the forgone item
• output: production, lowest opportunity cost; what the give up over what is produced