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Dan Silver (131)
Lecture 3

WEEK 3 Commercial Society.docx

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Dan Silver

WEEK 3 Commercial Society Propensity to trade MarketsDOL (division of labour)Productive LabourNational wealth Commercial Society Propensity to better condition- Saving Capital accumulation% productive workersNational WealthCommercial Society  Smith is arguing for commercial society that it has its own visions of good and bad in life.  What are the conditions of exchange? Money. What makes exchange work? Market (order of market)  Money  Why does it exist? Smith argues with limits of barter (both sides of exchange have to have something specific the other party wants). To solve the problem of not interest to exchange, persuade to buy b/c other people want it and are on demand.  Money is any commodity (ex: cows) that anyone will accept for anything. Everybody accepts as valuable.  Some work better as money than others.  What qualities make better or for worse money? a. Lasts- length may be determined by other factors. b. Divisible- it has to be divided into smaller units.  Use Value vs. Exchange Value - Use value: you get out of consumption of using it (use value of corn would be eating it). Exchange value- value of getting it for something you get out of the corn Markets  Market prices will differ to the real value. That difference creates gravitational forces that structure the market  Natural Price: however much it cost to bring product into the market which includes the wages for employee, rent for property use, profit for self, etc. The normal rate for all of this is a natural price. The real price is the value of labour time/effort it takes and is invested  Market Price: however much you sell a product for. When natural price is different from market price people adjust their behaviour. Ex:  Effective Demand: whether or not their wants of a product is effective, meaning able to purchase it influences the market through the law of supply (there is a direct relationship between the price of a good and the amount of it offered for sale. High price supply increases ex: corn- you can sell it for higher price so you stop eating and start selling) and the law of demand (there is an inverse relationship between the price of a good and the amount of the buyers are willing to purchase. Ex: Price is high people won’t buy it as much, price is low people will buy it more).  LimitsLiberty of motion: ppl have to be able to travel to diff places and go into a profitable industry. It restricts the operation of market. Freedom to change jobs depending on what’s on demand. Good information about market. 1. Concealing Profits: seek good information 2. Trade secrets (will work well as freedom to change jobs) 3. Scarcity: it will keep prices high if production is low 4. Monopolies: limits on number of companies so demand can increase 5. Certifications: gov’t certifications. You have to pass the test to get license restricts people interested in a business.  Consequences of market price too high and market can’t adjust, you end up rewarding people with high profits for going into endeavours that they shouldn’t go in to (unnatural reward) because they have other better talents. Distribution of Wealth  Original state - It is what it would be like where rent, profit, or wages didn’t exist. Everything you produce is yours. If you’re in the original st
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