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- 20 cooked meals and 40 baked goods. hmm, it seems like i have the absolute advantage in baked goods and you in cooked meals.
- Absolute advantage? I'm not familiar with the term
- Hey Alara! How has your businesses been going?
- Hey Nebula! its been going well. What about yours?
- Its been going well, what're your sales?
- 15 cooked meals and 45 baked goods, you?
- Absolute advantage is when you do better at something knowing the definition of absolute advantage can you guess what comparitive advantage is ?
- Is it when you have a lower opportunity cost? Which you have in cooked meals and me in baked goods
- Yeah and the way to find out who has the comparative is by finding the opportunity cost of one good. For us its cooked meals and baked goods
- Well that's means I have the comparative advantage in cooked meals because my opportunity cost is 1/3 while yours is 1/2.
- That is correct. Since we both specialize in the opposite of what the other does. What do you suppose we do?
- I think we should combine businesses and do division of labor. I'll cook and you bake.
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