What is the theory of absolute advantage?

Theory of absolute advantages is the belief that the nation will acquire the produce that uses their fastest available resources, most of the products. It is assumed that easier access to specific materials, sets of skills and other similar elements will make the country the most suitable for a particular type of production. The benefits of this theory may include increased cost efficiency and cost savings. When the nation has an absolute advantage, it has something desirable for other nations that inspire trade. For example, if each of them has five employees and one can produce ten units per hour, while the other can produce twelve units in the same period, the other company has an absolute advantage. After the theory of absolute advantage, the nation would produce products that work best with its resources.

One of the simplest ways to prove theory of absolute benefits is to compare the productivity of the work of two nations in a particular area. Absolute advantage will go to a nation capable of maintaining the highest levelproductivity. While the factors that contribute to this productivity may vary, the basic theories remain the same.

Theory of comparative advantages is often considered an absolute advantage theory. The theory of comparative advantages can also be demonstrated in two nations that produce the same item. A country that can produce the item most effectively can sell it a country that can create the same product but at higher costs. While the first country has a comparative advantage because it benefits from the sale of goods, the second country benefits because it costs less on importing this product than to achieve it.

Absolute Teuty Te Advantage was created by Adam Smith in 1776. He discussed the idea in his book question about the nature and causes of the wealth of nations . Smith basically suggested that a nation with an absolute advantage with a particular product can take advantage of profits from the store to buy items that other land wouldThey could produce more efficiently. His overall argument was that the nation should not hesitate to trade with other countries, because it was foolish to pay more to produce something on the domestic market that could be purchased for less international level.