It Is Not From The Benevolence Of The Butcher, By Adam Smith

Q1- " It is not from the benevolence of the butcher, the brewer or the baker, that we expect our dinner......." By using this quote Adam Smith refers to coincidence of interests . Adam smith writes that every individual tries to extract the greatest revenue he can from the society . He only cares about himself and only himself . He does not have an intention to promote the interest of society. However despite intending his own gain ,often he is le b invisible hand to promote the interest of society, which he didn't intend. "he intends only his gain and he is in this , as in many other cases , led b an invisible hand to promote an end which was no part of his intention" (Smith; Sandmo 2011). So by writing "It is not from the benevolence …show more content…
So for i.e. , "to hunt deer and beaver hunter need rifle . A gunsmith spends 5 hours making a rifle which will last for 10 hrs . It takes a 2 shots to kill a deer and 4 to kill a beaver . So the required time to kill a deer is an hour and two hours to kill beaver ". Another example Price of corn is not high due to rent but due to margins of cultivation so the prices are high labor requirement for corn cultivations .(Sandmo 2011) Later on Ricardo goes on to write about comparative advantage theory where he writes that its better for a country to trade the product it can get for lower cost from another country rather than make home . In other words country should specialize in producing good of which its comparative price is lower trade for product which it comparative cost is higher . For example the famous cloth and wine example. This theory contradicts with his earlier labor theory because for producers to have any incentives to specialize in a production of wine and cloth , the price of product relative to of that other product must deviate from relative labor content in both countries. John Stuart Mills identified this shortcoming and tried to solve it. In his contribution to theory of value he list , Mills writes firstly , to solves the conundrum of price in international trade mills introduces the concept of demand . he writes that relative price of export and imports adjust to level where export value equals import value . Secondly Mills insist that prices are function of demand and supply thus price is determined by mutual adjustment of demand and supply " the proper mathematical analogy is that of an equation. Demand and supply , the quantity demanded and quantity supplied will be made equal " . Thirdly ,Mill introduces reciprocal demand (Sandmo 2011, pg 95-96)So in Mills view , prices are formed by tendency of the