Absolute vs.

Comparative
Advantage
Eduardo, Elián, Mauricio
 Definition:
Absolute advantage is the
Absolute difference between the abilities and
efficiency that a nation has to
advantage produce goods and services
between others, by using this
countries can avoid the production
of goods that can be harmful for
their economy.
 Saudi Arabia

Saudi Arabia is one of the biggest countries in the middle east. In that region of the world oil is very easy to
obtain because there is a big quantity of this matter. This is the country with the highest fuel investment in
the world, representing 12% of the total fuel. This country leads the fuel industry due to the fact that its
production cost is low, in addition to having the necessary infrastructure to obtain this material. This
represents an absolute advantage for Saudi Arabia since its processes and tools are the necessary ones to
carry out such an extensive production. No other country in the world manages to produce the same amount
of fuel as Saudi Arabia, so it shows an advantage in this industry.
Example of a country’s product or service with a absolute advantage

In Saudi Arabia there are different companies focused on fuel production, one of them is Aramco. Aramco is
the largest crude oil production company in Saudi Arabia and in the world. This company completely
dominates this industry, the conditions and the abundance of crude oil have allowed this company to expand
around the world, thus being the richest and most prosperous company in the production of crude oil.
Aramco currently produces 10% of all the world's oil, and in 2018 had a profit of 99,130 million Euros. This
company produces 10 million barrels of oil daily. The company has approximately 76,000 employees around
the world. It is considered one of the largest companies in the world, both by its profits and by market
capitalization.
 Example of a country country that does not have a comparative
advantage equal to Saudi Arabia
Saudi Arabia is a country with a great comparative advantage over many other countries. An example of a
country that produces fuel but not to a level as great as that of Saudi Arabia, is Algeria. Areglia is a country
that does not have the same production capacity as Saudi Arabia, because the economy is different and,
furthermore, Algeria does not have the same amount of crude oil as Saudi Arabia. Algeria produces around a
million barrels of gasoline per day, while Saudi Arabia produces 10 million barrels of gasoline per day. As
we can see, Saudi Arabia has a production 10 times greater than that of Algeria. Algerian oil companies such
as Sonatrach are important however, they do not dominate the fuel market. Algeria's oil production
represents 4% of global oil. This shows a high difference between the production of Saudi Arabia and
Algeria.
 Definition: In
Comparative economy, comparative
Advantage advantage is the ability
to produce goods and
services at the lowest
possible cost.
 China
China is one of the most important countries at the moment of producing and exporting products. Due to
their geographical location with access to the ocean where many ships could transport products to other
countries. Also China is one of the most populated countries in the world with 1.4 thousand million people.
As there is a lot of population, the great factories can hire this people paying a low quantity of money. For
this reason Most of the Chinese companies have a very low cost of production and they have the facility to
send it to any country of the world.

China have a comparative advantage comparing with other countries and that makes them one of the
countries where most of the products come from.
 Example of a country’s product or service with a comparative
advantage
An example of a chinese company with a comparative advantage is Huawei. As China is a country where
some minerals like lithium or covalt are abundant and they could be used in a smart way to produce
technological devices. Devices from Huawei like smartphones are produced in a big quantity inside Chine,
and then they export all the merchandise to other countries. Having this great opportunity for the Huawei
company makes them one of the most successful companies of technological devices in the world. With this
brand of devices they are one of the direct competence of Apple or Samsung.
 Example of a country country that does not have a comparative
advantage equal to China
China is a country with a comparative advantage over many other countries. One example of a country that
is below China is Germany. Germany is a country well developed, but not with a high rate of population
where people are searching for jobs. For this reason production of merchandise will be much more lower
than China. There is an example of a cell phone brand in Germany called “Shift”. This company has just cell
60.000 units and the number if very far away as the China. It would be difficult to produce devices that will
compete with the most important companies like apple or Huawei With that example it's possible to see that
China have the control of most of the electronic devices in the world. Also Germany does have ports, but not
so much as China at the moment of exporting
Countries where China export their merchandise
 References:

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https://www.investopedia.com/terms/c/comparativeadvantage.asp .(Accessed on February 18th, 2022)

Potters, Charles. “Absolute Advantage.” Investopedia. Investopedia, February 8, 2022. h

ttps://www.investopedia.com/terms/c/comparativeadvantage.asp .(Accessed on February 18th, 2022)

“Inicio.” World Energy Trade, December 8, 2020. https://www.worldenergytrade.com/oil-gas/produccion/perfil-de-los-diez-principales-

paises-productores-de-petroleo-del-mundo.