walk me through this please Explain the difference between absolute advantage and comparative advantage. Provide an example to illustrate your explanation.

Question

walk me through this please                             	Explain the difference between absolute advantage and comparative advantage. Provide an example to illustrate your explanation.

beatbox_remix · Answer

anyone?

anonymous · Answer

Okay, so... I have just pulled up a shmoop site that could be helpful to you, unless you'd rather me explain it. I have read the site and I can easily explain it to you if you would like.

beatbox_remix · Answer

ya talk to me

anonymous · Answer

Alright. First, you have to know what both of those terms mean. Do you?

beatbox_remix · Answer

ive been trying to do 2 1/2 years of school work in one year so i have had to cheat bu im trying to re learn this to prepare for my asvabs

beatbox_remix · Answer

so no

anonymous · Answer

Ohhh, okay. Haha, that's cool. Well...

 Absolute advantage refers to a country’s ability to produce a certain good more efficiently than another country.

Comparative advantage refers to a country’s ability to produce a particular good with a lower opportunity cost than another country.

beatbox_remix · Answer

okay so i get that but how would you recommend me to illustrate that

beatbox_remix · Answer

and absolute means ur pushing out more goods than other places and comparative means you push out only one product

anonymous · Answer

Okay, so would you like to use a realistic situation?

beatbox_remix · Answer

anything that will help me get this done and is easier  on you

anonymous · Answer

Alright. So for absolute advantage:

Japan and the U.S can both produce cars, right? Well, Japan can produce them at a higher quality and at a faster pace than the U.S can. This means it has an absolute advantage in auto industry.

beatbox_remix · Answer

okay so i would write somthing along the line of that

anonymous · Answer

Now for Comparative advantage:

Whereas absolute advantage refers to the superior production capabilities of one nation versus another, comparative advantage is based on the concept of opportunity cost. The opportunity cost of a given option is equal to the forfeited benefits that could have been gained by choosing the alternative. If the opportunity cost of choosing to produce a particular good is lower for one nation than for others, then that nation is said to have a comparative advantage.

Assume that both France and Spain have enough resources to produce either wine or cake, but not both. France can produce 20 units of wine or 10 units of cake. The opportunity cost of each unit of wine, therefore, is 10 / 20, or 0.5 units of cake. The opportunity cost of each unit of cake is 20 / 10, or 2 units of wine. Spain is able to produce 30 units of wine or 22 units of cake. Spain has an absolute advantage for the production of both wine and cake, but its opportunity cost for cake is 30 / 22, or 1.36 units of wine, while the cost of wine is 22 / 30, or 0.73 units of cake. Because France's opportunity cost for the production of wine is lower than Spain's, it has the comparative advantage despite Spain being the more efficient producer. Spain's opportunity cost for cake is lower, giving it both absolute and comparative advantage.