By levidesmond69 on Skatehive
The mercantilist believes in trade restrictive policies which are based on maximizing export and minimizing imports But David Ricardo theory of comparative advantage has the idea that countries should produce what they're best at relative to others For instance England might be better than Portugal at making both wine and cloth but if england is much better at cloth and only slightly better at wine both countries benefit when England focuses on cloth and Portugal on wine which means If each country specializes in the production of goods for which they have a comparative advantage, the countries can trade with one another to achieve greater results than any could on their own. For example |Count/items|CLOTHES|WINE| |-|-|-| |ENGLAND|100|150| |PORTUGAL|150|100| Without specialization, England can produce 1 unit of cloth and 1 unit of wine in 250 hours. On the other hand Portugal can produce 1 unit of cloth and 1 unit of wine in 250 hours. Now, note that it is more costly for England to pr