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:
“My dream of politics all my life has been that it is the common business, that it is something we owe to each other to understand and ... discuss with absolute frankness.”
—Woodrow Wilson (1856–1924)
“Justice is simply the advantage of the stronger.”
—Thrasymachus 5th century B.C., Greek philosopher. The Presocratics, p. 259, ed. Philip Wheelwright, The Bobbs-Merrill Co., Inc. (1960)