Absolute Advantage

Definition

Absolute advantage refers to the ability of a country, individual, or firm to produce a good or service more efficiently than another country, individual, or firm. It is based on comparing the productivity levels and resource allocation between two entities.

Related terms

Comparative Advantage: Comparative advantage is when one entity has a lower opportunity cost in producing a particular good or service compared to another entity.

Trade: Trade involves the exchange of goods and services between countries or individuals to benefit from their comparative advantages.

Efficiency: Efficiency refers to using resources effectively to maximize output and minimize waste.