In economics, the principle of absolute advantage refers to the ability of a party (an individual, or firm, or country) to produce more of a good or service than competitors, using the same amount of resources. Adam Smith first described the principle of absolute advantage in the context of international trade, using labor as the only input.
Since absolute advantage is determined by a simple comparison of labor productivities, it is possible for a party to have no absolute advantage in anything; in that case, according to the theory of absolute advantage, no trade will occur with the other party. It can be contrasted with the concept of comparative advantage which refers to the ability to produce a particular good at a lower opportunity cost.
Read more about Absolute Advantage: Origin of The Theory, Further Reading
Famous quotes containing the words absolute and/or advantage:
“A man in the view of absolute goodness, adores, with total humility. Every step downward, is a step upward. The man who renounces himself, comes to himself.”
—Ralph Waldo Emerson (1803–1882)
“It’s a great advantage not to drink among hard-drinking people. You can hold your tongue and, moreover, you can time any little irregularity of your own so that everybody else is so blind that they don’t see or care.”
—F. Scott Fitzgerald (1896–1940)