absolute advantage- Unit 7

Unit 7

• 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 o a good/ service than another county can in the same time period.

• Comparative Advantage:

-A person or a nation has a comparative advantage in the production of a product when it can produce the product at a lower domestic opportunity cost than can a trading partner.

                                       

• Specialization and Trade:

-Gains from trade are based on comparative advantage, not absolute advantage.

• Examples of Output Problem:

- per acre 

-miles per gallon

-word per minute

-apple per tree

-television produced per hour

• Examples of Input Problems:

-number of hours to do a job

-number of acres to feed a horse

-number of gallon of paint to paint a house