1) Capitalism (A) In the Wealth of Nations, Adam Smith proposes that among the f
ID: 1226677 • Letter: 1
Question
1) Capitalism(A) In the Wealth of Nations, Adam Smith proposes that among the first economic exchanges were when a hunter killed a beaver but wanted to eat venison (from a deer). Show the circuit of production for this hunter. How does it change if money is introduced and the hunter sells his beaver and uses the money to buy a deer? How does the circuit of production look when you set the table and do the dishes for your family’s dinner, a meal made by your father?
(B) Describe the circuit for a capitalist who hires workers to produce commodities that she sells for a profit? Use the circuit of production to identify problems she might face.
C) Is your family’s dinner exchange or Adam Smith’s hunter an expansive system? What makes capitalism expansive? Use the circuit of production to identify why capitalists seek new markets for their produce, new technologies of production, and new sources of labor.
1) Capitalism
(A) In the Wealth of Nations, Adam Smith proposes that among the first economic exchanges were when a hunter killed a beaver but wanted to eat venison (from a deer). Show the circuit of production for this hunter. How does it change if money is introduced and the hunter sells his beaver and uses the money to buy a deer? How does the circuit of production look when you set the table and do the dishes for your family’s dinner, a meal made by your father?
(B) Describe the circuit for a capitalist who hires workers to produce commodities that she sells for a profit? Use the circuit of production to identify problems she might face.
C) Is your family’s dinner exchange or Adam Smith’s hunter an expansive system? What makes capitalism expansive? Use the circuit of production to identify why capitalists seek new markets for their produce, new technologies of production, and new sources of labor.
1) Capitalism
(A) In the Wealth of Nations, Adam Smith proposes that among the first economic exchanges were when a hunter killed a beaver but wanted to eat venison (from a deer). Show the circuit of production for this hunter. How does it change if money is introduced and the hunter sells his beaver and uses the money to buy a deer? How does the circuit of production look when you set the table and do the dishes for your family’s dinner, a meal made by your father?
(B) Describe the circuit for a capitalist who hires workers to produce commodities that she sells for a profit? Use the circuit of production to identify problems she might face.
C) Is your family’s dinner exchange or Adam Smith’s hunter an expansive system? What makes capitalism expansive? Use the circuit of production to identify why capitalists seek new markets for their produce, new technologies of production, and new sources of labor.
Explanation / Answer
Wealth of Nations was the book written by Adam Smith, Adam Smith was called the Father of Economics.
A)In this question where the hunter killed the beaver but wanted to have deer is a clear Barter exchange if money was not introduced. Now coming to the concept of Barter Exchange it is exchange of good for any other good. This system was very famous in earlier centuries. Now coming to the concept of circuit of production of the hunter here is that he has to find a person who posses the deer from whom he will buy and that person will also be ready to exchange his deer for the beaver. This example clearly predicts how Barter exchange system failed in earlier centuries and the concept of money was introduced.
When money is introduced in this economy the scenerio completely changes the hunter has to go to the market and buy the venison from a seller in exchange of money. Here the seller does not need to be concerned about the exchange as he himself if required can buy the beaver from any other source again with the exchange of money and this process continues.
In the third part where my father make the meal and I set the table and do the dishes is a complete different scenerio. Here my father owns the meal and he is earning money to provide the needs of the family. As a helping hand I set the table and do the dishes is a domestic help which cannot be calculated in production system. Father's earning is taken into consideration here for the production purpose.
(B) Firstly coming to the concept of Capitalism it is the system of private property ownership and where the sole motive is to earn profit. Here the capitalists hire workers with the particular skill to produce goods and commodities and in return he will pay the workers his wage.
The problem she might face in this system is that if the workers don't have the appropriate skill and also if introduction of new technology replaces the skill of the workers and by introduction of the machines will reduce the rate of profit over time.
(C) It is definitely the capitalist system is the expansive system as here Capitalists hires workers for his own production purposes and in exchange he pays wages to the labourers where as within the family the work is done completely in a volountary manner. Capitalists hires workers for their production purpose and the they are paid wage according to their necessary needs that is wages cannot fall beyond a certain level not even when there is excess supply of labour in the long run. Labour market is seen as a dynamic frame work. But if there is a vey large reserve army people survive through Family support or part time job.
Capitalists divided capital into constant capital and variable capital. Constant capital includes machinery where as variable capital includes labour. Laborers are paid exactly the wage which will cover up their subsistence needs. Capitalists have the tendency to replace labour if new technology comes and replaces the labour but it is also seen that it reults to decline in profit.
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