How economists think (week 1) Flashcards
What is the division of labor, and why did Adam Smith emphasize it?
The division of labor involves breaking down production tasks into specialized, repetitive functions. Adam Smith argued that this specialization increased productivity as workers became more skilled in their specific tasks, leading to greater overall efficiency.
What is comparative advantage, and why did David Ricardo emphasize it?
Comparative advantage refers to the idea that countries or individuals should specialize in producing goods or services in which they have a comparative advantage, even if they don’t have an absolute advantage. Ricardo’s work extended the concept of the division of labor to international trade, promoting the idea of specialization based on relative efficiency.
What is the theory of rent, and who developed it?
The theory of rent, developed by John Stuart Mill, explains that rent arises when land or resources have an absolute advantage in a particular use. Rent is the surplus earned from the most productive use of resources, beyond what is needed to cover costs.
Who is considered the founder of neoclassical economics, and what are its key principles?
William Stanley Jevons is regarded as one of the founders of neoclassical economics. Neoclassical economics emphasizes rational decision-making by individuals and firms, based on the concept of utility maximization and the interaction of supply and demand in markets.
What is the role of supply and demand in economics, and who popularized the “scissors diagram”?
Supply and demand are fundamental concepts in economics, representing the interplay between the availability of goods or services (supply) and consumer demand for those goods or services. Alfred Marshall popularized the “scissors diagram,” which visually illustrates the equilibrium between supply and demand in a market.
Who is Karl Marx, and what were some of his key economic ideas?
Karl Marx was a revolutionary socialist thinker. He criticized the capitalist system, arguing that profit derived from the exploitation of labor, and he introduced the concept of the labor theory of value, which asserts that a product’s value is determined by the labor required to produce it.
Who is John Maynard Keynes, and what is his most famous work?
John Maynard Keynes is best known for his work “The General Theory of Employment, Interest, and Money” (1936), which laid the foundation for modern macroeconomics. Keynes argued that government intervention, through increased spending during economic downturns, could help mitigate unemployment and stimulate economic growth.
