After read this book P487-497, do a 4 mins business Power Point .

WEALTH OF NATIONS 3

Wealth of Nations – Adam Smith

Page 293 – 349

This chapter discusses the variations in the relevant values of gold and silver. The author, Adam Smith, begins by discussing the quantity of Gold and silver that were exported to Europe and mentions that they were an equivalent of one ounce of Gold to 22 ounces of Silver. Around 7 ounces of Silver were shipped to East Indies, leaving a quantity of one ounce of gold to 15 ounces of silver. On the market, their value was fairly the same as the quantity supplied on the market. We should also note that the value of a substance is not equal to the quantities supplied to the market but can only be affected by such figures.

In most countries, their coins have more silver than cold because finding gold is hard and expensive. England has more gold on their coin than silver while France has less gold than silver. Rich countries attract precious metals and other precious items because such items fetch higher prices and they can afford them compared to poor countries. We also note that cheap goods are sold in huge quantities because they are easily available while dear or expensive goods are sold in huge values but less quantity because they are difficult to find.

An increase in the annual consumption will lead to increased prices because of high demand. A reduction in importation will lead to increased demand, thus increasing prices. Therefore, an increase in the importation of silver will increase its supply in the market and thus reducing its value while a reduction in the importation of the same metal will reduce its supply in the market and thus creating a deficit, which results to increased prices. The value of silver is suspected to reduce because wealthy European countries have increased their use, making it cheaper. An increase in the prices of some goods, such as poultry will mean that more silver will be used to get them, creating a suspicion that the value of silver has reduced.

The availability factors of production for producing a given item will make it cheaper and that item will affect other commodities. For example, if the production of poultry is cheap because of having accessible factors of production, the value of butcher's meat will reduce. Consequently, the prices of Gold and Silver were affected by the abundance and discovery of more mines making their supply higher and the fall of the feudal system and encouragement of a free market.

In conclusion, the writer suggests that any increase in the wealth of a country and an increase in the labor quantity applied raises the rent for the land. In the other hand, "the neglect of cultivation and improvement, the fall in the real price of any part of the rude produce of land, the rise in the real price of manufacturers from the decay of manufacturing art and industry, … all tend to lower the real rent of land" (Smith, 2007, pp. 198). A country should choose what is profitable and produce it and import what is expensive to produce in its borders.

Page 360 to 373: Of the value of stock

Smith dwells on the value of stock a person has. He suggests that a person who has little stock, just enough to feed him for a few days, will attempt to use it sparingly for that time. Another person who has more stock, that can feed him for a longer time, will use it to generate more revenue. That stock that is used to generate more revenue is called capital. The total of people's capital makes up societal capital. Such capital is employed in manufacturing or purchasing goods for resale at a profit. A person who has less stock will need to do more work to raise more stock for consumption (Smith, 2007).

Reference

Smith, A. (2007). Wealth of Nations: An inquiry into the nature and rise of the wealth of nations. Edited by S. M. Soares. MetaLibri Digital Library.