6.1.1—Absolute vs comparative advantage

Absolute advantage means producing more with the same resources or using fewer resources for a product. Comparative advantage means producing it at a lower opportunity cost relative to another producer.

Trade can benefit both sides when each specialises according to comparative advantage and the agreed terms of trade allow both to consume beyond their own production possibilities.

If Country A gives up 2 units of cloth to make 1 unit of food while Country B gives up 5, A has comparative advantage in food—even if B can produce more food per worker in absolute terms.

Absolute advantage alone does not determine the trade pattern; calculate opportunity costs before claiming who should specialise.