economics - 5) What is arguably the most famous "law" in...

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5) What is arguably the most famous “law” in economics is just five words: “Supply creates its own demand.” Jean Baptiste says. In the opening sentence of “The Wealth of Nations,” Adam Smith, the father of free market capitalism, laid down virtually the same “law” as Say- although taking 48 words to make the point. Do you agree with the above economic theory? If so, what if spenders don’t spend? I agree somewhat with the law in economics, “ supply creates its own demand.” If there is a supply of something there generally is a demand for it. Adam Smith says, “The annual labor of every nation is the fund which originally supplies it with all the necessaries and conveniences of life which it annually consumes, and which consist always either in the immediate produce of that labor, or in what is purchased with that produce from other nations.” On the other hand, I think the law works on the other side. I think demand creates its own supply. If there is a demand for something, there will in turn be a supply. So I think it can work both ways. If spenders don’t spend, such as in a time of a depression, there is less of a demand, and usually still a high supply. In this circumstance supply is not creating its own demand, but sooner or later the demand will rise and the supply will be there to fulfill it. Without a demand for a product sooner or later the supply will tend to stop producing, in turn the demand will start to rise. And finally the supply will rise once again.
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8.) Compare, contrast, analyze, and synthesize: Capitalism (Adam Smith) and Communism (Karl Marx). Capitalism is a political and economic system in which property including capital assents are owned and controlled for the most part by private persons. Communism is a stage of economic development, which is said to occur when all classes in society have been absorbed into the proletariat. This utopia envision by Marx is seen to be the stage of economic development which follows on from capitalism. Under capitalism the price mechanism is used as a signaling system, which allocates resources between uses. The extent to which the price mechanism is used the degree of competitiveness in markets and the level of government intervention, distinguishing the exact form of capitalism.
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9) The decision by consumers to buy larger or lesser quantities of a product at each possible price can be caused by: When more people want something, the quantity demanded at all prices will tend to increase. The increase in demand could also come from changing tastes, where the same consumers desire more of the same good than they previously did. When price increases demand usually tends to go down. When price decreases demand tends to go up. There can also be a drastic change in the economy such as September 11, 2001.
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This note was uploaded on 04/07/2008 for the course ECO 101 taught by Professor Isidore during the Spring '08 term at UMass Dartmouth.

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economics - 5) What is arguably the most famous "law" in...

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