Name: Abidullah

Reg: 301-1504097

Subject: International Economics

Submitted To: Ihsanullah Mohsen

Introduction

The International Trade is the exchanging method of goods and services across the
international boarder. Moreover, that is almost one third of the production of goods and
services are exchanged internationally around the world as far as I have known that
international trade is the exchange between two folks or entities in two different countries.
In fact, these theories are completely different types of theories in exchanging good and
services.

1. Mercantilism:
The theory in which the nations ought to accumulate money wealth in style of gold
and silver by encouraging exports and discouraging imports that’s known as
mercantilism. Moreover, this theory also measures the country’s well-being, like living
standards or human development.

The mercantilist countries try to play the alleged game that the world wealth should
be restricted by making them colonies and paid them very little for the exports and
charged them for the high value of imports.

The most downside with mercantilism is that every country engaged in export.
However, was restricted from import, another hindrance from growth of international
trade.

2. Absolute Advantage:
This Theory was developed by the Scottish Social Scientist Smith in 1776. This theory
produces the larger output of a decent or services than different countries
mistreatment an equivalent quantity of resources. In addition to, This Smith declared
that Tariffs and quotas mustn’t limit the international Trade it ought to be allowed the
flow in step with economic process. Contrary to mercantilism Smith argued that a
rustic ought to focus on production of products within which it holds associate
Absolute Advantage.

The Speculation of absolute advantage destroys the mercantilist concept that

international trade could be a game. Whereas, this theory could be a Positive-Sum
game as result of there are gains for each countries to associate exchange. In Contrast,
to Mercantilism this theory measures the nation’s wealth by living standards of its
folks and not by gold and silver.

3. Comparative Advantage:
The principle of Comparative Advantage is the most basic idea within the whole
international trade theory. Therefore, this theory was fist introduce by an economist
David Ricardo in 1817. Furthermore, it remains the serious of a lot of international
foreign policy and is thus necessary in understanding the fashionable international
economy.

The principle of Comparative Advantage states that a rustic ought to specialize in

manufacturing and exportation those merchandise during which includes a
comparative or relative price, advantage compared with different countries and will
import that merchandise during which it is a comparative disadvantage.