Absolute advantages and comparative advantages

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Absolute advantages and comparative advantages Door Mind Map: Absolute advantages and comparative advantages

1. Absolute Advantage

1.1. It is the ability of a country to produce a good more efficiently and at lower costs than others.

1.1.1. Relationship with the free market. No need for tariff barriers

1.1.2. Its effect is positive on economic growth since it favors competitiveness

1.1.3. A country is less efficient in absolute terms

2. Comparative advantage

2.1. It refers to the fact that a country should specialize in the activities in which it is good. Referring in Singular and not in Plural

2.1.1. Does not create International Trade

2.1.2. The free market is necessary so that the specialized good can be exported and import what is not

2.1.3. The value of work is the main element in the value of the good that is produced

2.1.4. Opportunity cost that exists for a country in the production of a certain good instead of producing another

3. The world of the single currency

3.1. Free trade is established

3.2. The specialization of each country is achieved in what is good, however, a third good is included, which is money, for which the exchange of goods is achieved. Well, this exchange is accompanied by an exchange rate.

3.3. There is no monetary sovereignty in the nations

4. World of national currencies

4.1. Free trade is established

4.2. The specialization of each country is achieved, however, the exchange of goods is subject to a reference indicator that manages to balance the goods.

4.3. There is monetary sovereignty in nations

5. The world of Barter

5.1. Free trade is established

5.2. The specialization of each country is achieved in the good that it knows how to do better than the others

6. Oscar J López