Unit 1 - 1.5 Economic History

Question 1

Who is Adam Smith

Answer 1

Adam Smith published his famous book on Economics in 1776: The Wealth of Nations

He is widely regarded as the father of Classical Economics

Written at the start of The Industrial Revolution, it captured his thoughts on how markets could be coordinated by demand and supply

Question 2

What were key ideas from Adam Smith in the 18th Century

Answer 2

• LAISSEZ-FAIRE (‘to leave alone’) economics
  A philosophy which believes there should be no (or minimal) government intervention with regard to decisions about resource allocation and production

INVISABLE HAND
The unseen free market forces of demand and supply that coordinate the best allocation of resources within society

It is driven by consumers and producers seeking to maximise their self-interest

Personal incentives and not government decisions determine the allocation of resources

FREE TRADE
Removing the protectionist measures found in mercantilism would increase production, trade and wealth

WEATLH
Production creates wealth for individuals and when individuals get wealthy, the nation gets wealthy

Question 3

What are the economic ideas from the 19th century

Answer 3

Classical microeconomics
(utility)

The concept of the margin

Classical macroeconomics
(Say’s law)