46. Absolute Advantage
Produce more with
the same resources
Comparative Advantage
Produce at a
lower opportunity cost
47. David Ricardo
(1772 - 1823)
Principles of
Political Economy
and Taxation
Comparative Advantage
48. The basis for trade is
comparative advantage,
not
absolute advantage.
49.
50. No Trade
2 Hooks and 2 Fish
10 Hours - 5 Hours per Fish
Total
Adam Eve
Hours
Make a
3 2 5
Hook
Catch
4 1 5
a Fish
Total
7 3 10
Hours
51. With Trade
2 Hooks and 2 Fish
8 Hours - 4 Hours Per Fish
Total
Adam Eve
Hours
Make a 2 hooks
6
Hook 6 hours
Catch 2 fish
2
a Fish 2 hours
Total
6 2 8
Hours