International Trade Concepts

Absolute and Comparative Advantage

Absolute Advantage

An absolute advantage is achieved when one country can produce a product at a lower cost than any other country, potentially gaining absolute control of the market for that good or service. Absolute advantage provides a country with leverage in international trade as it builds assets or wealth. Absolute advantage's can have a finite life as circumstances change. In the past French wine held absolute advantage, but recently, U.S., Australian, and New Zealand wines have started to become very competitive relative to French wines. In the United States, Ford Motor Company held absolute advantage, then General Motors, and finally other U.S. companies and foreign imports moved into the market. Absolute advantages are rare today, however some countries manage to approximate absolute advantages in some products. Climate differences can give some nations or regions an advantage in growing certain plants. Saffron is...
[ View Full Essay]