Question

1) In his book The Wealth of Nations, Adam Smith explained, "It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard in their own interest." Explain what Adam Smith meant by this. Be sure to tie your answer to one or more of "The Big IDeas" in microeconomics.

2) How do self-interested businesses benefit society?

3) Using the thinking at the margin concept, explain a student's decision to wake up and attend an 8 AM class in the winter (the student is already registered for the class).

4)Why do airlines sometimes advertise last-minute airline ticket sales at low prices? What economic principle are they applying?

Answer 1

1. From this Adam Smith Means that by selling products people want to buy, butchers, brewers and bakers make money. However, they only get that money if they can meet the needs of their customers effectively by offering things people want to buy. By doing in this way, they get financially rewarded and they create wealth for the nation as a whole by being productive citizens. They create the best outcomes for everyone by looking out for their own self interests.