00:01
To answer this question, let's just go with a simple example of when you can have a comparative advantage without having an absolute advantage.
00:07
So to figure out comparative advantage, we just have to find the opportunity costs.
00:13
We have to find the opportunity cost of producing an item.
00:17
So what is an opportunity cost? it's what you have to give up.
00:20
So in this matrix here, we are showing what it costs country a or how much country a can produce with one input for food and clothing.
00:32
Country y to produce food and clothing with also one input.
00:36
So, compare, so first let's just identify who has the absolute advantage.
00:41
The absolute advantage is whoever can just produce more in no matter what, okay, or with the same amount of input, sorry.
00:52
So with food, country y has the absolute advantage because with one input they can produce 50, 50, which is greater than 10.
01:00
So with one input, they have an absolute advantage with food.
01:04
And with clothing, they also have one input, and 150 is greater than 20.
01:08
So they also have the absolute advantage with respect to clothing...