Question

What is the absolute advantage? What is comparative advantage?

Short answer

The ability to produce a good or service at a relatively lower cost. The ability to produce a good or service at a comparatively lower opportunity cost.

Step-by-step solution

Step 1. Introduction

In the process of production, some explicit and implicit costs are incurred. The explicit costs are the cost of raw materials, inputs, etc. The implicit cost or oppportunity cost is the cost of sacrificing the second best alternative.

Step 2. Explanation

The ability to produce a good or service at a relatively lower cost or more quantity at the same cost is referred to as absolute advantage. On the other hand, the ability to produce a product at a comparatively lower opportunity cost than others is referred to as comparative advantage.