What is the difference between absolute and comparative advantage?

What is the difference between absolute and comparative advantage?

Absolute advantage refers to the uncontested superiority of a country or business to produce a particular good better. Comparative advantage introduces opportunity cost as a factor for analysis in choosing between different options for production diversification.

Which country has comparative advantage?

For example Ireland has a comparative advantage in cheese and butter due to climate and a large amount of land suitable for dairy cows. China has a comparative advantage in electronics because it has an abundance of labor.

How is comparative advantage calculated?

To calculate comparative advantage, find the opportunity cost of producing one barrel of oil in both countries. The country with the lowest opportunity cost has the comparative advantage.

Who has the comparative advantage?

A country is said to have a comparative advantage if it produces a good or service with the lowest opportunity cost.

Why opportunity cost is the best forgone alternative?

It is not simply the amount spent on that choice. The concepts of scarcity, choice, and opportunity cost are at the heart of economics. A good is scarce if the choice of one alternative requires that another be given up. The opportunity cost of any choice is the value of the best alternative forgone in making it.

What is the goal of studying opportunity cost?

The idea behind opportunity cost is that the cost of one item is the lost opportunity to do or consume something else; in short, opportunity cost is the value of the next best alternative.

Is opportunity cost an objective?

As a representation of the relationship between scarcity and choice, the objective of opportunity cost is to ensure efficient use of scarce resources. It incorporates all associated costs of a decision, both explicit and implicit.

What is the most scarce resource?

The six natural resources most drained by our 7 billion people

1. Water. Freshwater only makes 2.5% of the total volume of the world’s water, which is about 35 million km3.
2. Oil. The fear of reaching peak oil continues to haunt the oil industry.
3. Natural gas.
4. Phosphorus.
5. Coal.
6. Rare earth elements.

What is the rarest resource on earth?

Astatine

Is money a scarce resource?

Money and time are quintessentially scarce resources. Most people have too little of one, the other, or both. An unemployed person may have an abundance of time, but find it hard to pay rent.

Do students face scarcity?

Affective Objective: Students will • Accept scarcity as a fact of life. It is a paradox that people who learn to accept and deal with scarcity often achieve much more than those who don’t accept it. The inability to deal with scarcity leads to problems with money, education, skill development, and many other areas.