Absolute Advantage Concept

It’s said that a country has an absolute in the production of a certain good if it’s more efficient in the production of that same good, this is if it can produce bigger quantity for each factor unit of the production used. However, according to the Comparative Advantage Law, developed by David Ricardo and explained in his book “The Principles of Political Economy and Taxation” (where he uses a practical example involving Portugal and England), all countries benefit from the international commerce even if they are absolutely less efficient in the production of all goods. Such means that the existence of absolute advantages in the production of a certain good it’s not sufficient to guarantee the success in the exports of that good since, the other country, with absolute disadvantages, can present comparative advantage.

 

 

Translated from Portuguese by Susana Saraiva, Portuguese-English and English-Portuguese translation specialist. Contact: spams@sapo.pt.