Free Enterprise and Absolute Advantage

ABSOLUTELY INEVITABLE VS. NOT-AVAILABLE: In the global marketplace, there are many opportunities to be had, but only few are worth stepping up for. An absolute advantage is the opposite of unavailable. A company that produces a superior product or service has an inherent advantage over similar companies that do not. ABSOLUTELY INEVITABLE, the best way to achieve this type of edge is to design and build a superior product or service from the ground up. The absolute advantage is no longer available because another company has copied the formula.

ABSOLUTELY INEVITABLE: An ABSOLUTELY INEVITABLE situation occurs when one company can come up with a better way to deliver a better product or service than any of its competitors can. Without trying to be overly simplistic, a perfect example is a free-trade system that allows producers in two different countries to enter into a freely market environment. In this scenario, each country has a lower cost of production relative to the other country. An absolute advantage is thus created in the form of increased sales and profits.

ABSOLUTELY INEQUALITY: An absolute advantage can also refer to the level of customization that can be offered to a product or service. An example of this is a production line, where products are made to order. An absolute advantage is thus created in the form of increased production and efficiency. The increased production can then be channeled back into increased profits. This is why custom products are so successful.

ABSOLUTELY UNEXPLORABLE: There are many potential disadvantages to a market if it is not explored. One of these disadvantages is the potential for protectionism, or the attempt to protect domestic industries at the expense of foreign ones. If an absolute advantage refers to a specific industry, then this disadvantage is inherent and cannot be changed. However, when it comes to international trade, a company’s ability to protect its domestic industry can be somewhat mitigated through certain policies.

Comparative Advantage: Comparative advantage is simply a means of economizing on the amount of resources invested relative to the other side’s investment. For an international trade relationship to be efficient, both sides must be able to reinvest their resources back into the system, which in turn results in greater productivity, or output. These are the three keys to understanding the concept of comparative advantage.

Absolute Advantage: absolute advantage is often associated with economies of scale, or the production model that results from economies of scale. An absolute advantage is achieved when a company can produce a given product using fewer resources than the competitor. Some economists define an absolute advantage as being able to produce a product using less energy, raw materials, labor and other inputs than the competition. In economics, though, an absolute advantage is not equivalent to a reduction in costs, since costs must still be produced. Rather, absolute advantages are produced by companies operating with lower input costs, and therefore the products they produce are able to compete on price.

One of the main arguments behind investing in the United States is the argument that the United States is an absolute advantage when it comes to international trade. There are two important components to this argument; these are supply chain efficiencies and human capital. Supply chain efficiencies refers to the efficiency of producing a given product using the least number of resources. Human capital, on the other hand, refers to the pool of resources (such as workers) available to firms in order for them to be able to operate efficiently. Both components play a significant role in the efficiency of production, but the efficiency of distribution is more important than either.

The other important component to understanding the economic theory of absolute advantage is a country’s ability to adjust to external economic forces. When a country faces a sudden change in its national income or wealth level, for instance, it may feel the need to alter its production structure in order to remain competitive. Changes in the value of currency rates or increases in foreign investment rates can quickly change the amount of labor and other inputs, a firm requires in order to maintain its production. If a country cannot adjust quickly enough to take advantage of these changes, it runs the risk of experiencing a variety of consequences. Constant returns on capital are one such consequence, since increased domestic investment reduces the country’s ability to export goods, forcing the country to turn to other forms of investment, such as technology transfer or innovation.