history of Economics doctrine

Study Guide (Adam Smith): 5060/6060-070: HOET Spring 17

Question 1) What does Smith mean by the division of labour? How is the division of labour illustrated by the pin factory? [Difficulty levelà Easy] [Type: Short answer] Question 2) What does Smith mean by the “Invisible Hand” of the market? Explain using a market equilibrium diagram how according to Smith the market price converges to the natural price. What happens to economic profits when the two prices converge? [Make sure you define what Smith meant by market and natural price] [DifficultyàEasy] [Type: Short answer] Question 3) How according to Smith does a system based on individual self interest ensure that all the wants of society are fulfilled and there is never an excess of one commodity produced (shoes) or a shortage of another commodity (gloves). Alternatively how does a system of markets based on self interest (self) regulate itself and not collapse? [Make sure you draw diagrams for both markets] [Difficulty à Easy] [Type: Short answer] Question 4) How according to Smith does the market system lead to accumulation and growth in the long run? What impediments to accumulation does Smith envisage and how’re they resolved? [Difficulty à Moderate] [Type: Essay] Question 5]

Adam, Adam, Adam Smith Listen what I charge you with!

Didn’t you say In a class one day

That selfishness was bound to pay? Of all doctrines that was the Pith.

Wasn’t it , wasn’t it, wasn’t it, Smith?

(Stephen Leacock, Hellements of Hickonomics, 1936) Explain in detail. [Difficultyà Difficult] [Type: Essay/Joke/limerick/ not on exam but try anyway]