Five Economic Theory ,Mercantilism Theory,Comparative Advantage,Porter diamond model theory

Mercantilism Theory

Mercantilism was the theory of trade espoused by the major European powers from roughly 1500 to 1800. It advocated that a nation should export more than it imported and accumulate bullion (especially gold) to make up the difference. The exportation of finished goods was favored over extractive industries like farming.

Mercantilism was a reaction against the economic problems of earlier times when states were too weak to guide their economies and when every town or principality levied its own tariffs on goods passing through its borders.

Porter diamond model theory

An economist named David Ricardo formalized the concept of free trade between countries.  Ricardo’s theory stated that any country could benefit from trading with any other country as long as specialization took place. 

Free trade occurs when there are not any tariffs or taxes on incoming or outgoing goods and services.  Typically, countries tax incoming goods in an attempt to keep domestic producers competitive.  

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