Micro-Economics: Study Questions #1

What are the two facets of a mode of production according to E.K. Hunt?

1. Forces of production / productive technology of a society

2. Social relations of production

Social relations of production

- The relationship between the two social classes where the vast majority aims to produce the output necessary to sustain and perpetuate the mode of production as well as the social surplus and the minority which appropriates and controls it

- An individual only lives or labors as part of a larger social grouping ie family

Forces of production / Productive technology of a society

Consists of the current state of productive or technological knowledge, skills, and organizational techniques as well as the tools, implements, machines, and buildings involved in production

What is the first essential feature of capitalism?

market-oriented commodity production

Identify and define the two aspects of a commodity

- That it is created for its exchange value and not for satisfying a direct need
- The dependence of other producers to supply commodities that do satisfy
one’s direct needs

What is the most important aspect of the commodity for capitalist producers?

That it has an assigned value that can be traded for money to then buy other products.

What are the two implications of exchange value’s importance for capitalist producers?

- That you need to earn money to purchase any needed commodities
- To be produced long term a commodity needs to be profitable meaning the good must be consistently being purchased at a value price that outweighs production costs.

What is the second essential feature of capitalism? What does this mean?

Private ownership of means of production - the right to dictate how raw materials, tools, machinery, and buildings are necessary for production can be granted to individual producers who oversee this production process.
- Other individuals are excluded from having any say.

Define means of production.

The supplies, goods, labor, and commodities needed in the production process.

What are the two implications of this essential feature of capitalism?

1. Since producers have private ownership over the means of production, they possess the ability to conceive, control, organize, and connect the labor process
2. Producers reserve the right to designate any social surplus that is produced how they see fit.

Define social surplus.

- The sum of consumer and producer surplus
- The value of the finished commodity - the cost

What is the third essential feature of capitalism?

A large working class

What is the only commodity working-class members own?

His labor power

Define labor power.

Worker's ability/capacity to work, which is what is sold to the capitalist for the wages received.

Do members of the working class have a choice to sell labor power or not?

No

Analyze E.K. Hunt’s version of the fourth essential feature of capitalism. In particular,
what accounts for this behavior in workers and capitalists?

- That most people are motivated by, “individualistic, acquisitive, maximizing behavior.”
- One’s economic behavior is determined by the social relations you inhabit, If you are in the working class you must sell your labor

Analyze Adam Smith’s labor theory of value.

Adam Smith’s labor theory of value was the basis for my other future economists’ theories. He used the time commodities required to produce as the grounds for how commodities could be relatively priced and thus traded.

Analyze David Ricardo’s labor theory of value.

“the relative values of commodities were determined by the
relative amounts of labor necessary for their production.”

Analyze Karl Marx’s labor theory of value.

The value of a commodity comes from the socially necessary abstract labor time is the time required by individuals in the production process to produce a certain commodity. The quantity of time required to produce a commodity is generally reflected in its exchange value.

Define abstract labor.

- The source of a commodities exchange value, is homogeneous human labor.
- Undifferentiated form of labor

Neoclassical

subjective belief the equilibrium prices are effected by supply
and demand curves

Marxian Economics

time to produce the commodity or necessarily abstract labor thing

NeoRicardian/Sraffian

prices of production of a commodity are determined by cost of production or condition of production