What Is the Difference Between Absolute Advantage and Comparative Advantage

question 25

Essay

What is the difference between absolute advantage and comparative advantage? Which one is most important for determining what a country will specialize in producing?

---

Definitions:

Fiscal Policy

Government adjustments to its spending levels and tax rates to influence a nation's economy.

Lag

Lag refers to a delay that occurs between the cause and effect of an economic policy or other measured variable in the analysis of data.

Income Effect

The change in an individual's or economy's income and how that change will affect the quantity demanded of a good or service.

Substitution Effect

The change in quantity demanded resulting from a change in the price of a good, making other goods more or less expensive relative.