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:
“the absolute flight and rest
The universal blue
And local green suggest.”
—Robert Frost (1874–1963)
“The advantage of living is not measured by length, but by use; some people have lived long, and lived little; attend to it while you are in it. It lies in your will, not in the number of years, for you to have lived enough.”
—Michel de Montaigne (1533–1592)