Comparative & Absolute Advantage

Question 1

Describe the theory of ABSOLUTE ADVANTAGE

Answer 1

Question 2

Describe the theory of COMPARATIVE ADVANTAGE

Answer 2

Question 3

Why do countries have an ABSOLUTE or COMPARATIVE advantage?

Answer 3

1. Some countries have supplies of certain natural resources, e.g. the UK has oil and Japan doesn’t
2. Some countries have climate advantages, e.g. Spain can grow oranges, the UK can’t
3. Some countries have workers with the skills and knowledge