What is an absolute advantage What is a comparative advantag

What is an absolute advantage? What is a comparative advantage?

Give an example where you have an absolute but not a comparative advantage.

Why should we specialize and trade?

Solution

Absolute advantage means by using the same amount of resources let say labour how much qunatity the country can produce in absolute terms. For example :- Italy use 3 hrs of labour to produce 1 unit of wine and France uses 6 hrs of labour to produce 1 unit of Wine then clearly by absolute advantage we see 3hrs<6hrs so Italy is better off producing wine compared to France , which is in absolute disadvantage.
Comparative advantage is the oppotunity cost one country has over the other. It is basically the relative value of prices/cost required to produce good/service at a relative lower price than the other country.
An example where you have an absolute but not a comparative advantage :-

Country Wine(units/hr) Cloth(units/hr)
  A 3 6
B 4 10
Clearly, we see country A produces 3 units of wine in 1 labour hr and producees 6 units of cloth in 1 labour hr. Similarly country B produces 4 units of wine in 1 labour hr and producees 10 units of cloth in 1 labour hr.
Here , we see for country A and B
   3/4 > 6/10
So, country A specialize in wine and country B in cloth
The countries should specialize entirely because by specializing both the country gain maximum benefit because of low labour cost and high profit.