What Is The Difference Between Absolute Advantage And Comparative Advantage

On the other hand comparative advantage is when a country has the potential to produce a particular product better than any other country.

Differences between absolute and comparative advantage. Comparative advantage specifically refers to the lower opportunity cost of production of specific goods in comparison to competitors. This is the main difference between absolute and comparative advantage. In economics absolute advantage refers to the superior production capabilities of an entity while comparative advantage is based on the analysis of opportunity cost.

Comparative advantage is the ability to produce a good or service at a lower production cost than competitors. Absolute advantage is the ability to produce a good or a service at a lower opportunity cost than competitors. The key difference between absolute cost advantage and comparative cost advantage is that absolute cost advantage is the ability of a business to manufacture more products with the same amount of resources than another business whereas comparative cost advantage is the ability of a business to manufacture products better than another business with the same amount of resources. While absolute advantage is a condition where the trade is not mutually beneficial comparative advantage is a condition in which the trade is mutually beneficial.

In this lesson you learned about the difference between a comparative and an absolute advantage in microeconomics. Absolute advantage refers to lowering the production cost of a specific good in comparison to competitors. Comparative advantage can be described as the ability of a particular country to produce a certain product better than another country. Comparative advantage is the ability to sell a good or service at a higher price than competitors.

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Summary absolute cost advantage vs comparative cost advantage. While absolute advantage indicates which nation is best at producing a given good comparative advantage is an indication of which nation stands to lose the least by choosing to produce one good. Absolute advantage is the ability with which an increased number of goods and services can be produced and that too at a better quality as compared to competitors whereas comparative advantage signifies the ability to manufacture goods or services at a relatively lower opportunity cost.