Page 393 - DECO401_MICROECONOMIC_THEORY_ENGLISH

Microeconomic Theory

Notes When human takes birth in globe, he has some basic necessities which comes from his desire and desire
can be satisfied by consumption of product. Adam Smith has written in his book Wealth of Nation that
economical process draws from money. However, the economists of 19th century thought that supply
creates its own demand. In contrast, the economists of 20th century thought that demand creates its
own supply. Means both ideologies are on different concepts.

When human takes birth in globe, he has some basic necessities.

27.1 Thoughts about Employment

The economists of 19th century knew that if the supply is increased means people will get employment.
If production is increased this will eliminate the unemployment problems. However, they regarded
unemployment as temporary problem. Means unemployment can be omitted by decreasing rate of
wages. In brief, they told that increase of production gives opportunity to people to get employment. In
contrast, consumptionist means the economists of 20th century didn't like that theory. They thought that
only expanding of production does not end the unemployment. They believed that more production
creates crisis in a country. Means the production should be increased only of those products which are
in demand. Means products should be supplied as per their demand. They thought that if production
increases then unemployment will increase.

Give your views on Employment.

Self Assessment

Fill in the blanks:
1. There are mainly ....................... ideologies in economics.
2. Demand is directly depend upon ...................... .

27.2 Thoughts about Weakness

Weakness means decrease in capital. After the Second World War, the consumption power of people
was decreased. Productionists or the economists of 19th century thought that the investment of capital
is the way of prosperity. While the economists of 20th century think that destruction of capital is the
way of prosperity. Both ideologies support money. Because the economists of 19th century thought
that the production can increased by investment of money and by this people can get employment and
products. While the economists of 20th century think that capital can increase consumption and this
helps to omit crisis and increment of employments. They supported big demand can omit the crisis.

386 LOVELY PROFESSIONAL UNIVERSITY