Absolute vs Comparative Advantage
Absolute Advantage
- Individual - Exists when a person can produce more of a certain good/service than someone else in the same amount of time
- National - same as individual
- Looking at what's faster, more efficient
Comparative Advantage
- Individual/National - When they can produce good/service at a lower opportunity cost than another individual or nation
- Only one nation can have the absolute advantage in one product
- Looking at lower opportunity cost
Input Problem vs. Output Problem (Comparative)
- Input Problem - What can be produced using least amount of resources (land or time)
- Output Problem - Deals with production
- What is given up/what is produced
- Both problems look at lower opportunity cost
i really admire how you have organized these notes... the absolute advantage graphs will assist me for future reference. i now have w better understanding of what output problem is and what is its purpose.
ReplyDeleteThis cleared up any problems I had with knowing how to set up the input/output problems
ReplyDelete