Chapter 5: Mercantilism to Capitalism

Mercantilism

Economic policy using colonies for national wealth.

Favourable Balance of Trade

Exporting more than importing for economic gain.

Trade Surplus

Excess of exports over imports.

Economic Self-Sufficiency

Nation's ability to produce its own goods.

Colonial Benefits

Colonies provide cheap raw materials for the mother country.

Captive Market

Colonies restricted to buying home country goods.

Demise of Mercantilism

Resistance to mercantilism led to economic changes. Book “Wealth of Nations” and American Revolution contributed to the decline of mercantilist policies, promoting free trade and capitalism.

Adam Smith

Scottish economist advocating for capitalism over mercantilism. Author of “Wealth of Nations”.

Wealth of Nations

Smith's 1776 book opposing government-controlled wealth.

Basic Capitalist Principles

Goods produced for profit through individual self-interest.

Supply and Demand

Market forces determining prices of goods.

Competition

Market rivalry increasing efficiency and innovation.

Invisible Hand

Self-regulating nature of free markets.

Laissez Faire

Government non-interference in economic activities.

Consumer Protection

Market principles safeguarding consumer interests.