I’m in AP Econ and i’m having a little trouble understanding how someone who has absolute advantage doesn’t automatically have comparative advantage. I’ve looked for an example i could understand a couple of times, i’m hoping something here will be more clear.
Consider your favorite pro athlete, call him/her X. X is certainly at his/her sport S than you are, but is also almost certainly better doing other things, such as mowing a lawn, than you are. Sp X has absolute advantage over you in both activities.
Now, should X spend his/her time away from practice mowing his/her lawn or should s/he hire you to do it? If X had infinite time, X could and would do it all. But X only has a limited number of hours per day so can’t do it all.
Because X’s advantage at sport S is so much better than X’s advantage at mowing a lawn, it makes sense for X to pay you to do the mowing and spend the time practicing.
So you have a comparative advantage over X in mowing precisely because your nowhere near as good as X in sport S.
http://internationalecon.com/Trade/Tch/T-.php
Note that Chinese workers are much less efficient than American workers in manufacturing. But they have a comparative advantage in manufacturing that they don’t have in services. So China does more manufacturing and the U.S. does more services.
Answer
Consider your favorite pro athlete, call him/her X. X is certainly at his/her sport S than you are, but is also almost certainly better doing other things, such as mowing a lawn, than you are. Sp X has absolute advantage over you in both activities.
Now, should X spend his/her time away from practice mowing his/her lawn or should s/he hire you to do it? If X had infinite time, X could and would do it all. But X only has a limited number of hours per day so can’t do it all.
Because X’s advantage at sport S is so much better than X’s advantage at mowing a lawn, it makes sense for X to pay you to do the mowing and spend the time practicing.
So you have a comparative advantage over X in mowing precisely because your nowhere near as good as X in sport S.
http://internationalecon.com/Trade/Tch/T-.php
Note that Chinese workers are much less efficient than American workers in manufacturing. But they have a comparative advantage in manufacturing that they don’t have in services. So China does more manufacturing and the U.S. does more services.