1. Absolute Advantage
One person has an absolute advantage over another if he/she takes fewer hours to perform a task than the other person.

2. Comparative Advantage
One person has a comparative advantage over another if his/her opportunity cost of performing a task is lower than the other person’s opportunity cost

3. Comparative Advantage: The Basis for Exchange (Example)
Units of Pizzas per Day
Units of Hamburgers per Day
Jane 50
100
Sam 30 90

4. Comparative Advantage: The Basis for Exchange (Example)
Jane has:
Absolute advantage in the production of pizzas, but not hamburgers, and has a comparative advantage in the production of pizzas.
Absolute advantage in the production of hamburgers, but not pizzas, and has a comparative advantage in the production of hamburgers.
Absolute advantage in the production of hamburgers and pizzas, as well as a comparative advantage in the production of hamburgers.
Absolute advantage in the production of hamburgers and pizzas, as well as a comparative advantage in the production of pizzas.