August 10th, 2021 | Updated on March 11th, 2022
Absolute advantage is when a producer can produce a good or service in greater quantity for the same cost, or the same quantity at lower cost, than other producers.
Absolute advantage can be the basis for large gains from trade between producers of different goods with different absolute advantages.
Specifically, it refers to the ability to produce a certain good or service at lower cost (i.e., more efficiently) than another party. (A “party” may be a company, a person, a country, or anything else that creates goods or services.)