Difference between Comparative advantage and Absolute advantage

A comparative advantage is when a country can produce a good at a lower opportunity cost than another country. For example, if the UK can produce 10 pharmaceuticals or 5 cars, whereas Belgium can produce 4 cars and 2 pharmaceuticals a day. The UK would have a comparative advantage in pharmaceuticals as they have an opportunity cost of 1/2 car whereas Belgium has an opportunity cost 2 cars. Hence, the UK has a comparative advantage in pharmaceuticals. An absolute advantage is where a country can produce more of a good regardless of opportunity cost. Using the example above the UK has an absolute advantage in both cars and pharmaceuticals over Belgium.Be careful though as the example shows a country can have an absolute advantage in a good but not necessarily a comparative advantage.

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Answered by Conor T. Economics tutor

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