 SUBJECT NAME

BUSINESS ECONOMICS

 INTRUCTOR NAME
DR. MAHWISH JAMIL

 STUDENT NAMES (ROLL NO):

1. MUBESHRA ZAHOOR (9019-MBA-S23)
2. YOUAIL AKHTAR BUTT (9018-MBA-S23)
3. MUHAMMAD SHAHROZ FAROOQ (2029-MBA-S23)
INTERNALTIONAL
TRADE THEORIES

MERCANTILISM
 What Is International Trade?

 International trade theories are simply different
theories to explain international trade.
 Trade is the concept of exchanging goods and
services between two people or entities.  
 International trade is then the concept of this exchange
between people or entities in two different countries.

 What is Mercantilism?

 Mercantilism emerged, came into practice, and
developed between 1500 to 1770 AD it was
systematically developed by an Italian Economist,
Antonio Serra.
 Mercantilism is the starting point of the development
of the international business which was initially
originated in French as “Mercantile” and “Merchant”
meaning a general currency system.
 Understanding Mercantilism

 Mercantilism was a form of economic nationalism
that sought to increase the prosperity and power of a
nation through restrictive trade practices.
 Its goal was to increase the supply of a state's gold
 and silver with exports rather than to deplete it
through imports.
 It also sought to support domestic employment.

The Mercantilism theory


The
Mercantilism
theory
states that there is
a finite amount of
wealth in the world
and that it is in a
nation’s best interest
to accumulate this
finite wealth. Since
wealth is power, so by
accumulating wealth, a
nation can accumulate
power.
1. The Belief in the Static
Nature of Wealth
2. The Need to Increase
the Supply of Gold Mercantilism had
3. The Need to Maintain a several noteworthy
Trade Surplus
characteristics.
4. The Importance of a
Large Population
5. The Use of Colonies to
Support Wealth
6. The Use of
Protectionism

Key Points of Mercantilis
m Export Oriented: It advocates that a government should
encourage exports and restricts imports which help to get
a result in a favorable balance of payments or trade
surplus
 Government Interventionist Theory: The government has
total control over the trade of the nation. Businesses are
bound to work under government regulations.
 Zero-Sum Game: A zero-sum game means a loss to a
country is an equal benefit to another country.
 Bullionism: means the state on having the trade is based
on bullions i.e. gold, silver, and precious metals.
 Balance of Payment through Specialization: to get a positive
balance of payments and trade surplus through the
specialization in what resources it has
Criticisms of Mercantilism Theory

 After understanding, what mercantilism is, what do you
think mercantilism theory is still desirable in today’s
globalized economy?
 In this globalized economy, mercantilism may not best fit
the market as free trade, privatization, liberalization, and 
globalization are highly assumed.
 a powerful group of French thinkers known as the
physiocrats believed that if commerce was left alone, it
would self-regulate to its best benefit.
 The laissez-faire philosophy became the movement’s
watchword.
 The anti-mercantilist thought

The mercantilists failed to understand the notions of absolute
advantage and comparative advantage fleshed out by Adam
Smith and David Ricardo. Using arguments in favor of
laissez-faire and absolute advantage,
they proved that by imposing mercantilist import restrictions
and tariffs, the countries end up becoming poorer.
Laissez-faire thinkers such as Smith, Malthus, and Ricardo
opposed government efforts to help poor workers. They
thought that creating minimum wage laws and better working
conditions would upset the free market system, lower profits,
and undermine