Absolute advantage

Definition

Absolute advantage occurs when a country can produce a good more efficiently, using fewer resources, than another country. It is the ability to produce a product at a lower cost, in terms of labor and resources, than its trading partners.

Related terms

Comparative Advantage:

The ability of a country to produce goods at a lower opportunity cost compared to other countries, even if it doesn’t have an absolute advantage.

International Trade:

The exchange of goods and services between countries, allowing for increased efficiency and market expansion.

Opportunity Cost:

The cost of foregone alternatives when one option is chosen over another; crucial in determining comparative advantage