Absolute Advantage

In economics, a concept that describes one party's ability to produce a good or service with greater efficiency than another party.

Absolute Advantage is an economic term propounded by Adam Smith in the context of international trade. The concept underpins the idea that a party (an individual, organization or country) should specialize in the goods or services for which they exhibit absolute advantage over the competition.

An entity can attain absolute advantage by spending less per unit on production, making the process more efficient, or decreasing the number of inputs.