Two Examples of Absolute and Comparative Advantage
This box provides two simple examples to illustrate the
concepts of absolute and comparative advantage. Each
example also shows the gains from specialization. You will
notice that the type of data provided in each example is
different. The first example shows the absolute dollar cost of
producing two goods in two countries; the second shows the
amount of output of two goods that can be produced from the
resources available in each country. In both examples,
however, we can identify the pattern of absolute and
comparative advantage.
Example #1
Argentina and Brazil can both produce fish and leather. The
table shows the total resource cost, in dollars, of producing
one kilogram of each good in both countries.
Fish (kg) Leather (kg)Argentina $2 $5Brazil $3 $4