Comparative and Absolute Advantage

Absolute Advantage The ability of a country, individual, company or region to produce a good or service at a lower cost per unit than any other country. Usually based on factor endowments and factor intensity

Comparative Advantage In comparing two entities, (People, countries, states etc…) producing two items, economists will find where the lowest opportunity cost exists.

Comparative Advantage Example USA -T-Shirts 30 -Computers 40 China -T-Shirts 20 -Computers 10

Comparative Advantage Example USA -T-Shirts 30 -Computers 40 China -T-Shirts 20 -Computers 10 USA O.C. T-Shirts = USA O.C. Computers = China O.C. T-Shirts = China O.C. Computers =