absolute advantage


Also found in: Wikipedia.

Absolute advantage

A person, company or country has an absolute advantage if its output per unit of input of all goods and services produced is higher than that of another person, company or country.

Absolute Advantage

The ability for an economic actor to produce a good or service using fewer resources. For example, if an individual produces 100 bricks using 100 units of labor and a second individual produces 200 bricks using the same amount of labor, the second individual has an absolute advantage in the production of bricks. This concept is generally attributed to Adam Smith. See also: comparative advantage, replacement cycle.
Absolute advantageclick for a larger image
Fig. 1 Absolute advantage. The relationship between resource input and output.

absolute advantage

an advantage possessed by a country engaged in INTERNATIONAL TRADE when, using a given resource input, it is able to produce more output than other countries possessing the same resource input. This is illustrated in Fig. 1 with respect to two countries (A and B) and two goods (X and Y). Country A's resource input enables it to produce either 100X or 100Y; the same resource input in Country B enables it to produce either 180X or 120Y. It can be seen that Country B is absolutely more efficient than Country A since it can produce more of both goods. Superficially this suggests that there is no basis for trade between the two countries. It is COMPARATIVE ADVANTAGE, however, not absolute advantage, that determines whether international trade is beneficial or not, because even if Country B is more efficient at producing both goods it may pay Country B to specialize (see SPECIALIZATION) in producing good X at which it has the greater advantage.
References in periodicals archive ?
It also gives the company an absolute advantage in supplying Original Equipment (OE) tyres to global leading car manufacturers, including Fiat, Volkswagen and its Skoda Auto and Seat units.
9% of market shares in 2012, Alipay followed by its absolute advantage in internet payment area, ChinaPNR, ALL IN PAY and Tenpay ranked in the third, fourth and fifth respectively.
Citing an example of Benue State, which he described as having absolute advantage in agriculture, Mr.
Hand-woven carpet is an absolute advantage (for Iran) and this is the only good in the world led by Iran," he pointed out.
On military might, the Chinese military is about 10 times larger than Taiwan's armed forces and has absolute advantage over Taiwan's military in terms of the number of ballistic missiles and submarines, it said.
Iqbal Tabish, Secretary General, SAARC CCI said that the complete phasing out of the negative list and removal of non-tariff barriers (NTBs) by India will provide level play filed for both countries, however, based on comparative and absolute advantage Indian exporters will be greatly benefitted.
At first glance, one might think that, since Portugal requires fewer labor hours to produce either commodity, it has nothing to gain from trade, because it has an absolute advantage in producing both commodities.
ITS service offering will ensure CELL ONE remains agile and highly responsive to its growing customer base in Namibia, where the telecom industry is rapidly evolving and customer needs are changing dramatically "Our new-born partnership with ITS and the benefit from its ample expertise in the Telecommunications Industry will be to our absolute advantage, contributing to the realization of our vision, our corporate marketing strategy, and our short-to long-term growth plans," Cell One's CEO, Soban Pasha said.
According to the research report of an investment bank, the Company takes an absolute advantage and has no close competitors in cancer detection technology applied in domestic insurance policies.
In the latter ease, the country is said to have an absolute advantage (i.
I do not think we have an absolute advantage over our opponents anymore," team manager Zhou Jihong told the China Daily.