Absolute Advantage

28 Jan 2013


Absolute advantage is the advantage one nation, region, or individual has over another when more product can be produced in that nation than in another using the same amount of resources. It is a macroeconomic concept.

If each nation specializes in the product(s) in which it has an advantage (absolute or comparative), each nation specializes and total world production increases. The nation then trades the commodity it specializes in for one it does not. The gains from specialization make the gains from trade possible.

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