Question

QUESTION 1 Provide a real example of "comparative advantage." Explain the example making a clear distinction between the absolute advantage and the "comparative advantage. First, demonstrate the absolute advantage, second, demonstrate the comparative advantage, then, the comparison between them.

Answer 1

Comparative Advantages - - This is a economic concepto Advantage means_ something_beneficel. It someone has more benefits as compared to another than it can be said that first menhond Derson has more advantage as compare to second menhones person. In this caser first person has comparative advantegen It is not $rues that person baving compaxobre advantage is on always best situation. Use of comparative advantage in effecêre woup may leads to create absolute advantage Absolute advantagens When someone use his advantage Situhon and also get benefit through that advantage, than it is said to be a Absolute advantage By comparing opportunity cost, one can distingush between advantage as Absoluite or compara bive.

Ditternce between Comparative Absolute 1 Advantage Advantage It considers the It considers Actual opportunity cost benefit to identy to compare Absolute advantage Advantage Hopportunity Cost It does not compare compare the advantage between advantage over two Products other Products It compares It compares ability Capability of producing of producing Products Products It deals with | It deals with lola marginale only low cost o opportunity - Mašginal costs Cost