Absolute Advantage is The ability of a country, individual, company, or region to produce a good

or service at a lower cost per unit than the cost at which any other entity produces that good or
service.
Opportunity Cost
The opportunity cost of producing something measures the cost of not being able to produce
something else because resources have already been used
Comparative Advantage
A country has a comparative advantage in producing a good if the opportunity cost of
producing that good is lower in the country than it is in other countries.
A country with a comparative advantage in producing a good uses its resources most
efficiently when it produces that good compared to producing other goods.
For example, a limited number of workers could be employed to produce either roses or
computers.
The opportunity cost of producing computers is the amount
of roses not produced.
The opportunity cost of producing roses is the amount of computers not produced.
A country faces a trade off: how many computers or roses should it produce with the
limited resources that it has?
Millions of Roses
Thousands of Computers
U.S.
-10
+100
Ecuador
+10
-30
Total
0
+70
Case Study:
Babe ruth => Comparative Advantage
Babe Ruth is a greatest slugger
Babe Ruth had an absolute advantage in pitching
Babe Ruth made the record in pitching but in 1961, it was broken byt Yankee Whitney and Roger
Maris
Roger Maris was better pitcher than Babe Ruth
Roger Maris have the comparative advantage in pitching
In 1919, Babe Ruth was moved to center field to bat (hit)
He made the record of 54 hit home run and remains untouched this day => he had comparative
advantage in batting