Absolute Advantage Economics Comparative Vs. Essay

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For Florida to have a comparative advantage with California in regards to the trade of oranges, Florida would have to be able to produce oranges cheaper than California. Florida would need some distinct productivity advantage, like cheaper fuel prices, cheaper labor, a more efficient production system. This comparative advantage would then exist only in relation to the trading of oranges between Florida and California.

If one were to then compare Florida and New Mexico, then the particular circumstances between Florida and New Mexico would have to be evaluated to see if Florida had the comparative advantage. If New Mexico had some production advantage over Florida in the production of oranges, then while Florida may have a comparative advantage over California, it would not have a comparative advantage over New Mexico. And the circumstances between orange trade between New Mexico and California can be analyzed as well and it may be possible that the circumstance are such that while Florida has the comparative advantage over California, and New Mexico has the comparative advantage over Florida, it could still be possible for California could have the comparative advantage over New Mexico.

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What matters is the economic relationship between the two trading partners and the production costs in relations to each other.

These type of advantages often lead some countries or areas to specialize in the production of certain products. In doing so the specialization is hoped to give the country or area an absolute advantage over all other trading partners by virtue that the area is specialized for the production of that particular product. It can also give a comparative advantage between countries, even if they produce the same product, because by specializing in the production of that product, one area can decrease production costs and thus gain a comparative advantage. (Maneschi, 1999, p. 47) But this advantage would only be between two particular countries, and one would have not to have specialized......

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