Absolute Advantages

Absolute advantages

The ability of a country to produce more efficiently than another country.

COUNTRY	Notebook	Cloth
MALAYSIA	1000	200
CHINA	800	400
TOTAL	1800	600

Before trade

·         Before occurrence of trade, Malaysia has issued as much as 1000 units of Notebooks and 200 units of Cloth. While, China have issued as much as 800 units of car and 600units of motorcycle. 

·         Before occurrence of trade, the amount of total world output is 1800 units of Notebooks and 600 units of car.

International trade

·         Notebook       :           Malaysia can produce more compared to China

·         Cloth               :           China can produce more compared to Malaysia

·         Malaysia has absolute advantage in Notebook production because Malaysia can produce more Notebook compared to China.

·         China has absolute advantage in Cloth production because China can produce more Cloth compared to Malaysia.

Specialization of trade

·         Malaysia produce Notebook

·         China produce Cloth

COUNTRY	Notebook	Cloth
MALAYSIA	2000	0
CHINA	0	800
TOTAL	2000	800

·         When the specialization, each of the country will focus to their production.

·          Malaysia will produce 2000 units of Notebooks and China will produce 800 units of Cloths.

·         So, the total world output will increase to 400 units;

-          Notebook production increases to 200 units.

-          Cloth production increases to 200 units.

·         Malaysia will export Notebook and import Cloth and China will export Cloth and import Notebook.