chapter 4 Flashcards
classical econ rawr (fav chapt//hardest chap)
the basis for classical economics
Self-regulating democracies and capitalistic market developments
is considered the Father of Economics
Adam Smith
He saw wealth in the great
variety of goods that people traded and consumed
Adam Smith
Smith viewed gold and silver as not having
an absolute value. Instead, there were commodities whose value rose and fell with ______________
supply and demand
It was self-regulating because
people produced according to what people would buy and people consumed according to what they wanted and could afford
Adam Smith, self regulating market
invisible hand was introduced by Adam Smith in his book ‘The Wealth of Nations’. He assumed that an economy can work well in a
free-market scenario where everyone
will work for his/her own interest
Adam smith provided the genesis for the concept of?
GDP = Gross Domestic Product
Smith used the example of the labor required to make a pin to illustrate the effectiveness
of this method.
Assembly Line Production Method
Founder of Modern Utilitarianism
Jeremy Bentham
an ethical theory holding that actions are morally right if they tend to
promote happiness or pleasure (and morally wrong if they tend to promote unhappiness or pain) among all those affected by them
Modern utilitarianism
Bentham figured prominently among the small number of men who became known
as
philosophical radicals
consumer theory is by?
Jeremy bentham
he is the father of modern contraceptives
reverend thomas robert malthus
“the end justify the means
jeremy bentham
states that the supply of food cannot keep up with the growth of the human population, inevitably resulting in disease, famine, war, and calamity
Malthusian trap
_____________ as contraceptives
moral restrains
happiness is the absence of pain
John Stuart Mill
Ideas of cooperatives
John Mill
a person can be indifferent and can also favor two products at once
John Stuart Mill
Axiom: Reality, we are more consistent. But in real world we become inconsistent because of?
Emotions
Thomas Malthus said more population = ?
lesser marginal output
was groomed from birth by his father to
become the ultimate Victorian intellectual and utilitarian reformer.
John Stuart Mill
holds that “happiness is the sole end of human action, and the promotion of it the test by which to judge of all human conduct”
John Stuart Mill
first developed a theory in 1817 to explain
the origin and nature of economic rent.
David Ricardo
**“that portion of the
produce of the earth which is paid to the landlord for the use of the original and
indestructible powers of the soil.” **
Rent as defined by David ricardo
According to Ricardo rent arises for two main reasons:
(1) Scarcity of land as a factor and
(2) Differences in the fertility of the soil.
Ricardo assumed that land had only one use
to grow corn
rent of land arises because the different plots of land have different degree of productive power; some lands are more fertile than others. So there are different grades of land.
Differential Rent
holds that the value of a good (how much of another good or service it exchanges for in the market) is proportional to
how much labor was required to produce it, including the labor required to produce the raw materials and machinery used in the process.
Labor Theory of Value
says that value of a good is not determined by how much labor was put into it but by its
usefulness in satisfying a want and its scarcity
Subjective Theory of Value
h stated that “all attempts to improve the real income of workers were futile and that wages perforce remained near the subsistence level.”
Iron Law of Wages
describe the inexorable tendency of real wages under capitalism to adhere to a level just sufficient to afford the bare necessities of life.
Iron Laws of wages
Iron Law of Wages is a term invented by ?
Ferdinand Lassalle
Economic growth takes place due to ____
capital accumulation
Capital accumulation output increases. More labour is employed, total
wages paid increases, population increases
Stationary State
Growth can be restored through import of corn, i.e., through
international trade. Repel the corn laws, which is beneficial to landlords only. Protection leads to increase in corn prices as the margin increases. This increases rent not profits, which are consumed.
Solution for Stationary State
