Unit VII--Part 3: Comparative & Absolute Advantage

Absolute Advantage
-faster, more, more efficient
Comparative Advantage
-lower opportunity cost
-no 2 countries have same comparative advantage in making same products

EX) David Ricardo bakes 2 cakes per hour and 6 pizzas per hour. Ricky Ricardo bakes 4 cakes per hour and 8 pizzas per hour. This is represented in the chart below.

	David Ricardo	Ricky Ricardo
Cakes	2	4
Pizzas	6	8

1. Who has the comparative advantage in baking cakes? (**the smallest #)
6/2=3
8/4=2
3 to 2 cakes
Answer=Ricky

2. Who has the comparative advantage in making pizza?
2/6=0.33
4/8=0.5
0.33 to 0.5
Answer=David

**Bible: