Comparative & Absolute Advantage

Unit 7: Comparative & Absolute Advantage (05.16.18)

Absolute Advantage

• who can produce more with the same resources / who can produce the same output with less resources
• one can produce both products
• ex: Papa Johns producing 20 pizzas while McDonalds only produces 4

Comparative Advantage

• who can produce with the lowest opportunity cost
• lowest opportunity cost = smallest number
• only one individual/nation can produce

Input vs. Output

• input:
• # of hours to do a job
• # of gallons of paint to paint a house
• # of acres to feed a horse
• output:
• miles per gallon
• tons per acre
• words per minute
• apples per tree
• computers produced per hour