Adam Smith + Supply and Demand

Adam Smith

Father of modern day economics

Adam Smith time

1700s

Adam Smith book

the wealth of nations

invisible hand

self interest and competition

division of labour

specilisation, risk for unemployement, assembly line

economies of scale

bigger companies drive smaller companies out, can buy in bulk, advantages, perfect competition is rare

collective good harm

certain goods and services, police drugs alcohol, could promote the opposite of what is wanted

Freedom of Industry

no hinders for starting company, in sweden systembolaget and licenses for ex medical industry to protect public

Many Actors

should be competition in every industry, no monopolies

Free Competition

no cooperation between companies, no collusion

Private Ownership

nothing should be owned by the state, more accuntability, more incentive to do well, private investors can pull money at any time harming the public

Firm Rules

legal contracts between all parties in a sale always

Comprehensive Information

the consumer should have easy access to know what is on the market, much like today

Limited State Involvement

government shouldnt help failing companies, markets should determine, natural selection, will yield best result for consumer as quality is favoured

Law of Supply

how willing and able is a producer to make a product, higher price = more products, more profit

Law of Demand

how willing and able is a consumer to buy a product, lower price = more bought

affects demand

expectation, price, income, need, quality, advertisement

affects supply

resources, cost, technology, taxes and tariffs

Equilibrium Price

where supply and demand intersect, both consumer and producer willing and able