Absolute Advantage:
Individual- exists when a person can produce more of a certain good/service than someone else in the same amount of time (or can produce a good using the least amount of resources).
National- exists when a country can produce more a good/service than another country can in the same time period.
Comparative Advantage:
A person or a nation has a comparative advantage when it can produce the product at a lower domestic opportunity cost than can a trading partner.
Examples of output problems:
1. Words/min
2. MPG
3. Tons/acre
4. Apples/tree
5. Televisions produced per hour
Examples of input problems:
1. # of hours to do a job.
2. # of acres to feed a horse
3. # of gallons of paint to paint a house.
Specialization and trade:
Gains from trade are based on comparative advantage, not absolute advantage.
That video was very informative by the way! Nice pictures! Absolute advantage is very imperative when comparing goods but sometimes it becomes weakend when the goods are too complicated to actually be compared.
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