I Early history of Economics

A Laws of economics: general rules that guide the production, distribution, and 

consumption of goods (P17)

B Mercantilism: an economic system that advocates the building up of the states 

treasury with the goal of accumulating as much wealth (gold) as possible 

1 Trade Balance: the difference between the amount of goods a nation 

sells and the amount that it buys

2 Tariffs: taxes governments used to discourage imported goods 

3 Imperialism: the establishment of colonies and territories for the benefit 

of their mother countries (EX: English empire in the 17-1800s)

C Phsiocrats (“The Economists”) (P20) possible essay

1 Economists in the 1700s who 1st trie to create a science of PDC of 

goods 

2 Samuel du pnt:published Physiocracy (“The Rule of Nature”)

3 Believed that a nation’s true wealth comes from Land and Natural resources 

4 Laissex-faire: “Let things alone”; the govt. Should leave the economy to 

operate itself with little intervention 

5 Classical economics 

A A Belief system that originated with physiocrats 

B The Free market system is the best possible system

D Adam Smith:  The founder of modern economics

II Adam smith: “Father of Modern Economics”

A Wealth of Nations: most famous economic book in history; est basic principles 

of modern economics (1776)

B Smith's economic principles 

1 Division of Labor: separation of complex work into individual tasks to 

increase productivity

2 specialization: allowing an individual to excel in one specific area of his 

field resulting in higher quality products or service 

3 Labor: single most important aspect of any economy;without this, an 

economy will suffer or fail- results in a productive economy 

C “Invisible Hand” of the market 

1 producers Desire: to sell 

2 Consumers Desire: to buy 

3 The “Invisible Hand” brings the 2 desires together and satisfies both of 

them

III Ways to prosperity 

A Prosperity: general economic success; the ability to enjoy many different goods 

and services 

B Wealth: the value of goods and finances that a person owns 

C six ways to increase wealth 

1 produce goods from already existing services 

2 increase the resources used for producing goods 

3 use new resources to satisfy existing wants 

4 Make goods better at satisfying wants 

5 Reducing people's wants 

6 Redistribute wealth and resources 

D The true source of wealth and prosperity is labor or work