Absolute advantage | Trade theory

Absolute advantage is a trade theory developed by Adam Smith. Adam Smith argued that our country should purchase a product from another country if that country have an absolute advantage over our country.

With an absolute advantage means that a country can produce a product with less resource consumption compared to another country. Adam Smith argued that a country with an absolute advantage in the production of a product not would import this product but could export this product.

Countries must therefore import products from other countries when other countries have an absolute advantage, lower costs, for production of a product.