00:01
Let's first understand what absolute and comparative advantages are before we figure out whether you can have one without the other.
00:06
So an absolute advantage is where a one trading partner can produce more than the other trading partner with the same amount of inputs.
00:18
So i'm just going to give an example.
00:20
For one worker, country a can make 60 pounds of food.
00:37
And then with one worker, country b can make six pounds of food.
00:45
In this situation, with the same number of workers, country a can produce more.
00:50
So they have the absolute advantage.
00:54
Now, comparative advantage is kind of different.
00:57
Comparative advantage means that the opportunity cost of producing one item of something is cheaper for one country than another.
01:06
So with, for this, let's draw our regular matrix to understand what trading would look like.
01:18
So we'll have country a, country b, and our inputs will be, let's say, food, or cars and trucks.
01:31
And these are just random numbers that i'm going to assign.
01:34
So they can produce with one person, one car, and for country a, they can produce one car, with one person or two trucks with one person.
01:44
Country b, they can produce five cars with one person or, let's say, 15 trucks with one person...