Country A has an absolute advantage because it can produce more food and more clothing in one day than country B.
Country A has a comparative advantage in the production of food because a worker in country A can produce 6 times as many units of food as a worker in country B, but only 1.5 as many units of clothing.
Output per Day of Work 2 1 Country B 3 6 Country A Clothing Food
In a command economy , a central government either directly or indirectly sets output targets, incomes, and prices.
In a laissez-faire economy , literally from the French: “allow (them) to do,” individual people and firms pursue their own self-interests without any central direction or regulation. The central institution of a laissez-faire economy is the free-market system .
A market is the institution through which buyers and sellers interact and engage in exchange.