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Absolute Advantage
Absolute advantage is an economic concept that refers to a country's ability to produce a particular good or service more efficiently than another country, using the same amount of resources. A country with an absolute advantage can produce more of a certain good or service in less time or with fewer resources than another country.
To provide a numerical example, let's consider two hypothetical countries, Country A and Country B, and two goods, wheat and cloth.
Suppose that Country A can produce both wheat and cloth more efficiently than Country B, as shown in the table below:
Country A can produce 10 tons of wheat per hour or 5 yards of cloth per hour
Country B can produce only 5 tons of wheat per hour or 2 yards of cloth per hour.
Because Country A can produce both goods more efficiently than Country B, it has an absolute advantage in both goods. This means that, in theory, Country A could produce both goods more cheaply than Country B and potentially sell them at a lower price, assuming there are no barriers to trade between the two countries.
However, the theory of comparative advantage suggests that even if one country has an absolute advantage in producing all goods, both countries can still benefit from specialization and trade if they have different relative costs of production.
See also
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IB Economics - Benefits of Trade
Study Notes
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Trade and Specialisation: Play ConnectTrade
5th November 2023
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4.2.6.2. Patterns of Trade (AQA A Level Economics Teaching Powerpoint)
Teaching PowerPoints
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Retrieval Activity - Specialisation and Trade
18th September 2022
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Absolute Advantage
Topic Videos
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Comparative Advantage (Online Lesson)
Online Lessons