Explore commonly used personal finance terms.
Absolute advantage refers to the ability of a person, company, or country to produce a good or service more efficiently than others, using fewer resources. This economic concept, developed by Adam Smith, highlights how entities with absolute advantage can produce goods at lower costs, contributing to trade specialization. While absolute advantage leads to cost benefits, comparative advantage focuses on relative efficiency, and together, they form the basis for international trade and market competitiveness.
