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Absolute Advantage Assignment Answers

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Absolute Advantage Definition

It is an ability of a company, country or an individual for creating commodities and services at a cost which is lower than per unit cost or a different product which produces same commodities or services. Companies which have absolute advantage can create a commodity or service by using inputs in a small number or use an efficient process to produce goods or services than what others are using for production.

Absolute Advantage in Detail

It is an international trade theory where a country can make products in a more efficient way than other countries. Countries which have absolute advantage agree to specialise in making and selling that particular commodity and services using funds which are generated for purchasing other products and services in which it specialises. Adam Smith pioneered this idea of absolute advantage in the 18th century. It was part of his doctrine of labour division. One can know more from our Absolute Advantage assignment answers.

Understanding Absolute Advantage with Examples

Absolute advantage can be explained best with examples. So if the United States produces wine 500 million gallons per year whereas France produces 3 billion gallons per year then France has absolute advantage. It is because the amount of wine France produces. The amount of wine produced by France at the same time is much more than the United States.

Another example which can make it clearer is that Kate can make a sweater in 5 hours while Amy can do it in 3 hours. This shows Amy has absolute advantage over Kate as it takes Amy to build the same amount of sweater in lesser time than Kate.Β  Get more examples from our Absolute Advantage homework answers.

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