Next video:
Loading the player...

Absolute advantage is the ability of an individual, company or country to produce a good or service at a lower cost than any competitor. An entity with an absolute advantage requires fewer inputs and/or has more efficient processes, allowing it to undercut its competitors’ prices and earn higher profits.

International trade theory, however, tells us that two entities will benefit from specialization based on their areas of comparative advantage.

Related Articles
  1. Insights

    What Are Economies Of Scale?

    Is bigger always better? Read up on the important and often misunderstood concept of economies of scale.
  2. Small Business

    3 secrets of successful companies

    Make smart investments by using these three secrets to spot up-and-coming companies to invest in before they become household names.
  3. Investing

    Understanding First Mover Advantage

    Someone has to be first into a market. Find out when this can be an advantage for a company (and when it's not).
  4. Investing

    Due Diligence in 10 Easy Steps

    Learn how due diligence offers key information for potential investments. Find out how these 10 important steps can give you a balanced views of pros and cons of your investments and allow you ...
  5. Small Business

    How Special Purpose Entities Help Fight Risk

    A special purpose entity, sometimes called a special purpose vehicle, is a legal entity created for one very limited, particular task. Typically, SPEs are subsidiaries of a larger corporation.
  6. Investing

    Who Are Apple's Main Competitors in Tech?

    The megalithic company has its share of competition.
  7. Investing

    Buffett's Moat: How Sustainable is Google's Competitive Advantage? (GOOGL)

    Learn about the sources and sustainability of Google's competitive advantage by examining Warren Buffett's concept of an economic moat.
Trading Center