1. (25%)At the outset of chapter X of Book I of Adam Smith’s The Wealth of Natio
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Question
1. (25%)At the outset of chapter X of Book I of Adam Smith’s The Wealth of Nations, Smith begins with the statement that “The whole of the advantages and the disadvantages of the different employments of labor and stock, must, in the same neighborhood, be either perfectly equal or continually tending to equality.”However, if we look at “different employments of labor” (e.g., different occupations, industries, or sectors of employment), we see that money wages vary across occupations and other aspects of work, and often quite substantially.
a. (15%)Write an essay in which you reconcile Smith’s statement about “the whole of the advantages and disadvantages of the different employments of labor… must… be either perfectly equal or continually tending toward equality” with the observed variation in wages across occupations.Your essay should identify two different factors that facilitate this reconciliation.
b. (10%)Suppose that two adjacent labor markets are in equilibrium as described in the quote from Smith above, but now assume that a positive shock occurs in one of those markets (e.g., gold is discovered) and the demand for labor increases.What happens initially, and what happens in the long run to get back to the situation described in the quote?
Explanation / Answer
(a) The nature of employment varies from labors to employees. There are many factors which are required for reconcillation. It depends upon the location of the industry and nature of the work profile allocated to those appointed in the company. In order to have proper management the lower and highr line management works together in cordination. It helps to conduct smooth work in less interval of time. The equality at workplace is required as caste and creed no bar. The efficiency of work increases when allocation is done as per the requirements and skills of the employees.
(b) At inital stage, the role of labours and employees must be to create effective ouputs. It helps in increasing revenues on a long run. The positive results by the company helps to increase revenues and demand in the market.
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