What is comparative and absolute advantage?
Microeconomics
Production
Jan 11, 2023
Jan 11, 2023
Jan 11, 2023
Jan 11, 2023
Olaolu
Some individuals, businesses, or countries are more efficient at producing certain goods than others, but this efficiency depends on the opportunity cost of other resources they have to give up to produce it.
Absolute advantage. The ability to produce more of a good than a competitor with the same resources.
Comparative advantage. The ability to produce more of a good than a competitor at a lower opportunity cost.
Something to remember
Actions have consequences (Always consider what you’re giving up (the opportunity cost) to get something before you make a decision).
Absolute advantage is about quantity, while comparative advantage is about efficiency.
Say you can read this post in 30 secs and another can read in 1 min. While reading, your Jollof rice got burnt on fire because you can’t do two things at a time, but the other fellow has already finished cooking, made tea, and served himself. Who has the best advantage?
Some individuals, businesses, or countries are more efficient at producing certain goods than others, but this efficiency depends on the opportunity cost of other resources they have to give up to produce it.
Absolute advantage. The ability to produce more of a good than a competitor with the same resources.
Comparative advantage. The ability to produce more of a good than a competitor at a lower opportunity cost.
Something to remember
Actions have consequences (Always consider what you’re giving up (the opportunity cost) to get something before you make a decision).
Absolute advantage is about quantity, while comparative advantage is about efficiency.
Say you can read this post in 30 secs and another can read in 1 min. While reading, your Jollof rice got burnt on fire because you can’t do two things at a time, but the other fellow has already finished cooking, made tea, and served himself. Who has the best advantage?
Some individuals, businesses, or countries are more efficient at producing certain goods than others, but this efficiency depends on the opportunity cost of other resources they have to give up to produce it.
Absolute advantage. The ability to produce more of a good than a competitor with the same resources.
Comparative advantage. The ability to produce more of a good than a competitor at a lower opportunity cost.
Something to remember
Actions have consequences (Always consider what you’re giving up (the opportunity cost) to get something before you make a decision).
Absolute advantage is about quantity, while comparative advantage is about efficiency.
Say you can read this post in 30 secs and another can read in 1 min. While reading, your Jollof rice got burnt on fire because you can’t do two things at a time, but the other fellow has already finished cooking, made tea, and served himself. Who has the best advantage?
Some individuals, businesses, or countries are more efficient at producing certain goods than others, but this efficiency depends on the opportunity cost of other resources they have to give up to produce it.
Absolute advantage. The ability to produce more of a good than a competitor with the same resources.
Comparative advantage. The ability to produce more of a good than a competitor at a lower opportunity cost.
Something to remember
Actions have consequences (Always consider what you’re giving up (the opportunity cost) to get something before you make a decision).
Absolute advantage is about quantity, while comparative advantage is about efficiency.
Say you can read this post in 30 secs and another can read in 1 min. While reading, your Jollof rice got burnt on fire because you can’t do two things at a time, but the other fellow has already finished cooking, made tea, and served himself. Who has the best advantage?
Microeconomics is concerned with the everyday decision you make as an individual, whether to buy a basket of tomato instead of a bag or buy tomato at all or, as a business, whether or not to stock up on goods in anticipation of a seasonal rise in demand.