The American economic system is the most productive in the world. The reason for this is the unlimited wants' of people or consumer in a market. For example, a person can satisfy themselves by buying a pair of Nike at your local Footlocker; however, that person may decide to buy a shirt at The Gap after. This show there is no end to a person total wants for goods and services. In the modern economy, a individuals do not produce most items they consumer rather they sell labor services (work) and then the income we get in exchange to buy the wants of that individual. In this paper, I will introduce the early classical economists' developed theories about the way markets and market economies work. The study was mainly concerned with the dynamics of economic growth. The foundation to the early classical economic was book call An Inquiry Into the Nature and Cause of the Wealth of Nations published by Adam Smith in 1776. Their are other economists that also provide economic theories; names like William Petty, Thomas Malthus, and John Stuart Mill. In this paper, I will discuss the theory of Adam Smith and other economist and then distinguishing the different characteristics of classical political.
Adam Smith acknowledged the wealth of a nation with the yearly national income, for Smith saw this income as produced by labor applied to land and capital equipment. Before land and capital equipment are suitable by individuals; the national income is divided up between laborers, landlords, and capitalists in the structure of wages, rent, and profits. The theory of value (price) developed by William Petty introduced a fundamental distinction, between market price and natural price. Market prices are pushing around by many brief influences that are difficult to conceive. Natural prices capture systematic and continual forces operating at a point in time. Market prices are always nurtured in the direction of natural prices. Smith and Petty theory of what determined...
Cited: 1. TEXTBOOK : Macroeconomics Private and Public Choice 9th ED. By J. Gwartney ; R. Stroup ; and R. Sobel pp. 11, 45,271, 217,81
2. The Fortune Encyclopedia of Economics David Henderson Ed. pp. 836-838
The Circular Flow Model
Please join StudyMode to read the full document