ECON1101 - Comparative v Absolute Advantage
Example
| Fred | George | |
| Firewood | 20 minutes | 30 minutes |
| Shoe Repairs | 10 minutes | 30 minutes |
Fred has the absolute advantage with each, but he should not do both, as collecting firewood costs him 2 shoes, but only costs George 1 (who hence has the comparative advantage). However Fred has both the absolute and comparative advantage when it comes to shoe repairs, as he loses only 1/2 his firewood, whereas George loses 1.
Comparative Advantage Sources: (These change over time)
- Individually: talent, education, training, background, etc
- Nationally: natural resources, infrastructure, culture etc
page revision: 2, last edited: 26 Jul 2011 06:47
