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 freedom of woman will be the dawn of the day of man’s regeneration. In raising her he will elevate himself.”
—Tennessee Claflin (1846–1923)
“It is a great advantage for any man to be able to talk or hear, neither ignorantly nor absurdly, upon any subject; for I have known people, who have not said one word, hear ignorantly and absurdly; it has appeared by their inattentive and unmeaning faces.”
—Philip Dormer Stanhope, 4th Earl Chesterfield (1694–1773)