Theory of absolute advantage is based on the idea that countries can benefit from trade if they specialise in producing goods or services

Theory of Absolute Advantage is one of the earliest economic theories that explains the benefits of specialisation and international trade between countries.

It was proposed by Adam Smith , the father of modern economics, in 1776 in his seminal work, " The Wealth of Nations " The theory of absolute advantage is based on the idea that countries can benefit from trade if they specialise in producing goods or services in which they have an absolute advantage over other countries.

Theory of Absolute Advantage provides a useful framework for understanding the benefits of specialisation and international trade.

Theory assumes that there are only two countries and two goods produced, and that all resources are homogeneous within a country.

The theory assumes that all factors of production are fixed and cannot be increased or decreased through investment and innovation.

It does not explain the possibility of international trade if one country has an absolute advantage in both goods.

Theory does not account for the impact of technological change on trade.

New Zealand has an absolute advantage in agriculture due to its favourable climate and abundant natural resources.

Zambia specialises in agriculture and exports agricultural products to other countries.

The theory of comparative advantage suggests that countries should specialise in producing goods in which they have a lower opportunity cost of production than others.