What Is Absolute Advantage?

What Is Absolute Advantage?

"Absolute advantage" is an economics term that refers to the ability of a person, firm or household to produce a good or service with less input than any other person, household or firm. It is different than a comparative advantage, which focuses on gains from trade and specialization.

For many companies, having an absolute advantage can give them the competitive edge that they need. Michael Jordan, for example, had an absolute advantage at playing basketball compared to all other players.

Competitive advantage, on the other hand, occurs when someone can produce something at a lower cost than anyone else. It focuses on the total opportunity cost.