According to Library of Economics and Liberty, comparative advantage is when someone provides a good or service at a lower cost than his competitors. Absolute advantage occurs when a product or service provider is the best at producing a good or service over its competitors.Know More
Shmoop explains this in terms of farming; in this case, it is not conducive for a country to compete against another country for a comparative advantage, when the factors leading to the advantage are environmental. For example, if the soil, temperature, and amount of rain yields an environment necessary to grow a certain fruit, then it is cheaper for that country to grow and export that fruit over any other country. Another country can attempt to compete by importing soil, building shade, etc., but this would make the process more expensive. Shmoop states that if a country produces a good or service as a result of an advantage, this is called Specialization.
If an absolute advantage is being sought, the goal is efficiency. A country may compete against other countries in the production of oil. The country that is the best at producing oil will sustain an absolute advantage. This country has discovered a quick and low-cost solution to supply oil, leading to the advantage.Learn more about Economics
An absolute advantage example is Michael Jordan, who is the best at playing basketball. Adam Smith introduced the absolute advantage theory in the context of a nation, but it can be applied to individuals too.Full Answer >
One advantage of a traditional economy is that it tends to be more stable than a market economy. Traditional economies are based on tradition and custom that guide them in a way that makes sense to all participants.Full Answer >
In a currency system, most items have a predetermined value, making transactions fast and standardized. When consumers know the cost of an item in advance, they can simply present the cash necessary to purchase the item. Paying with money also allows consumers to make purchases without worrying about finding high-demand items to trade.Full Answer >
Money is a positive thing for a society to have, since it provides citizens with a medium of exchange that they can use to pay for needed goods and services. Bartering was common before money became widely used, but it has limitations that make it much more inflexible than money.Full Answer >