Business Economics Report: Columbia's Economic Advantages Analysis

This report examines the economy of Columbia, highlighting its growth and position as a major Latin American economy. It delves into the concepts of absolute and comparative advantage, using the coffee industry as a primary example. Columbia's climate, fertile soil, and skilled workforce contribute to its absolute advantage in coffee production, allowing it to produce high-quality coffee with the same or fewer resources. Furthermore, the report discusses how Columbia gains a comparative advantage through efficient production techniques and a relatively educated workforce, leading to lower production costs and increased competitiveness in the international market. The analysis concludes that Columbia's success in the coffee industry stems from a combination of both absolute and comparative advantages, making it a significant player in global trade.

Running head: BUSINESS ECONOMICS
BUSINESS ECONOMICS
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1BUSINESS ECONOMICS
Overview of the chosen country
The economy of Columbia has successfully grown over the last decade. It is renowned as
the fourth largest economy in Latin America in terms of Gross Domestic Product. The current
growth rate of Columbia is about 0.5 percent and rate of unemployment has decreased
effectively due to a rise in consumer demand and inflation rate (Mian, Sufi and Trebbi 2015).
Absolute or comparative advantage
Absolute advantage is achieved when an economy is able to produce goods by using
same or fewer resources in lesser time than the other economies. Comparative advantage is
gained by an economy when an economy produces goods at a lower opportunity cost or price as
compared to its competitors.
The climate of Columbia is effective for the cultivation of coffee and serves as the
greatest source for rural employment. On an average, Columbia produces over 11.5 million bags
of coffee. It is the second biggest coffee producer in the world. Coffee plants are planted at an
altitude of 6,400 feet that gives them an absolute advantage in coffee production (Zhu, So and
Hudson 2017). The economy has over 940,000 hectares of coffee farming area that has fertile
and volcanic soil with a suitable temperature of 46-75 Farenheight.
Coffee is produced by small run family farms that uses 100 percent Ababica beans. The
coffee produced is rich is quality that is not found in large corporate firm (Valencia et al. 2015).
This makes the coffee market effective for international trade. Columbian coffee has a high
consumer demand in the international market that has improved the Columbian export market.
Coffee comprise of 8.1 percent of the total exports which generates about 30.2 billion dollars.

2BUSINESS ECONOMICS
Columbia has renovated the coffee plantation areas that produces over 14.6 million bags
of coffee. As a result, Columbia can produce coffee more effectively by using the same amount
of resources that gives them an absolute advantage. Proper climate, availability of farms, climate
and soil is effective for improved quality. They use improved techniques that has lowered the
production cost by significant amounts and enabled the firms to gain a comparative advantage in
production. This is effective for the creation of goods at a low rate using efficient production
techniques. The economy has a comparative advantage in the provision of skilled workforce at
cheap prices (Rao and Fuller 2018). Columbia has relatively educated worked work force that
enables the firms to produce large number of goods at a lower price.
Availability of cheap labor enhances the profitability of Columbian firm as the overall
cost of the production remains low. Firms needs to pay lower wages to the labors that enables the
good at low prices. This raises the demand for goods in the international market and gives them a
comparative advantage in production.
Conclusion
Therefore, it can be concluded that the production of coffee has both absolute and
comparative advantage in production. Absolute advantage is gained due to suitable climatic and
land conditions that provides more goods with similar resources. Comparative advantage is
gained due to implementation of innovative production techniques due to availability of skilled
labors that gives a comparative advantage in Columbia.

3BUSINESS ECONOMICS
Reference List
Mian, A., Sufi, A. and Trebbi, F., 2015. Foreclosures, house prices, and the real economy. The
Journal of Finance, 70(6), pp.2587-2634.
Rao, N.Z. and Fuller, M., 2018. Acidity and antioxidant activity of cold brew coffee. Scientific
reports, 8(1), pp.1-9.
Valencia, V., West, P., Sterling, E.J., García-Barrios, L. and Naeem, S., 2015. The use of
farmers' knowledge in coffee agroforestry management: implications for the conservation of tree
biodiversity. Ecosphere, 6(7), pp.1-17.
Zhu, G., So, K.K.F. and Hudson, S., 2017. Inside the sharing economy. International Journal of
Contemporary Hospitality Management.