Absolute and Comparative Advantage
In trade, absolute advantage is when a country can produce a greater quantity of a good or service with the same input (typically labor) at a lower cost. The theory of absolute advantage was developed by the Scottish economist Adam Smith in his book The Wealth of Nations.
Comparative advantage is a theory developed by the English political economist David Ricardo in his book On the Principles of Political Economy and Taxation. Comparative advantage, also called Ricardian advantage, describes one country's ability to produce a good or service at a lower opportunity cost than another country. Opportunity cost is the idea that making and selling one product or service is a trade-off, since you forfeit the opportunity to produce another product instead.
Read this section and answer the questions at the end.
Glossary
absolute advantage
when one country can use fewer resources to produce a good compared to another country; when a country is more productive compared to another country
gain from trade
a country that can consume more than it can produce as a result of specialization and trade