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• Classical theories of international trade

  Historical country-based theories
• Modern mid-twentieth century theories

  Firm-based or company-based theories
• Adam Smith published Wealth of Nations


  1776
• David Ricardo published Principles of Economics


  1951
• Standard Theory of International Trade

  Classical, country-based international trade theory that states a country's wealth is determined by its holdings of gold and silver
• Free trade system


  Individuals benefit from a greater choice of affordable goods
• Mercantilism


  Restricts imports and reduces the choices available to consumers
• Division of labor


  Separation of a work process into a number of tasks, with each task performed by a separate person or group of persons
• Trade surplus


  The amount by which the value of a country's exports exceeds the cost of its imports
• Industrial capitalism


  The second phase of capitalism in which industries/factories became the dominant factor in the production of goods
• Absolute advantage


  A country's inherent ability to produce specific goods efficiently and effectively at a relatively lower marginal cost
• Comparative advantage


  A country's capability to produce specific goods at lower marginal cost and opportunity cost
• Marginal cost


  The cost incurred in producing an additional unit of a product
• Opportunity cost


  The value you will get from an alternative that you did not choose
• The Theory of International Trade and Commercial Policy is still considered to be one of the oldest branches of economic thought, and has evolved from the Standard Theory of International Trade
• Bartering


  A direct trade/exchange of goods and services
• Advantages of bartering


  • It does not involve money and it is very simple
• Disadvantages of bartering


  • It is difficult to find people who need what the other people have and there is no standard measure of value
• Modern forms of bartering

  • Swap markets
  • Online auctions
  • Numerous websites that offer online bartering arrangements
• Early development of trade

  1. Early humans had very little needs and there was no need for exchange of goods

  2. As the number of people increased, they started forming groups and travelled long distances to find food

  3. Intergroup interaction started, and this paved the way for a system of trading

  4. As cultivation and farming flourished, there was no shortage of food, and they started trading surplus goods, and the system of trade flourished
• Barter system was introduced by the tribes of Mesopotamia, then adopted by the Phoenicians, and improved by the Babylonians


  6000 BC
• Salt was so valuable at that time that the salary of Roman soldiers was paid in salt
• The first recognizable metal coins appeared in China

  1000 BC
• Small bronze celts (prehistoric tools resembling chisels) and bronze rings played a monetary role


  Around 770 BC
• Objects in the shape of a circle became some of the first coins
• The Chinese moved from coins to paper money


  Around 700 BC
• Lydia's King Alyattes minted the first official currency, non-standardized coins from electrum (a naturally occurring alloy of gold and silver)


  Around 600 BC
• King Croesus of Lydia installed the world's first bimetallic monetary system of pure gold and pure silver coins, the Croeseid


  Around 550 BC
• Electrum coins were in production even before Croesus, possibly under King Gyges
• The first regular system of exchange in Canada involving Europeans occurred in Tadaoussac, where French traders bartered each year with the Mantagnais people


  Early seventeenth century
• The first colonial settlement at Quebec was established by Samuel de Champlain


  1608
• Beaver pelt


  The one universally accepted medium of exchange in Quebec, although wheat and moose skins were also employed as legal tender
• As the colony expanded and its economic and financial needs became more complex, coins from France came to be widely used
• Silver and copper coins, apparently intended only for the West Indies, was minted in 1670, believed to have circulated in Canada, but could not be circulated in France
• West Indies


  A chain of islands in the Caribbean Sea and Atlantic Ocean divided into three groups: The Bahamas, the Greater Antilles, and the Lesser Antilles
• Spanish dollars (piastres) represent the first distinctive Canadian coins

  Mid-1600s
• Livre


  The currency of the Kingdom of France and its predecessor state of West Francia from 1781 to 1794
• Jacques de Meulles, Intendant of Justice, Police, and Finance came up with the card money, which served as money in Canada

  1685
• Legal tender


  Currency, such as coin and paper money, is valid and sufficient for the payment of debts
• Inflation


  Increase in prices, reducing the purchasing power of money