Activities
1. Adam Smith on Self Interest
Read the following excerpt from Adam Smith's The Wealth of Nations and then answer the questions which follow.As every individual, therefore, endeavors as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labors to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it.
Please answer the following questions:
- What does Smith mean by the "invisible hand"?
- What is the function of self interest?
- How does Smith see self interest helping the public?
- Give one example of how a merchant or shop keeper's self interest helps consumers.
- Give one example of how a consumer's self interest helps a merchant or shop keeper.
2. Analyzing Economic Behavior
Divide the class into five groups. Assign each group one of the five occupations listed in the chart. Each group should discuss the self interest of the person in that occupation with regard to price, reliability, ease of use,trendiness, competition and productivity. After ten minutes, one member of each group should be prepared to make a two-minute speech on the group's findings. The class should fill in the chart with self interest views for each occupation discussed. After completing the chart, describe, in a short paragraph, how self interest helps society function better. | |||||
| . | software engineer | computer manufacturer | consumer | retail merchant | online merchant |
| price/cost | . | . | . | . | . |
| reliability | . | . | . | . | . |
| ease of use | . | . | . | . | . |
| trendiness | . | . | . | . | . |
| competition | . | . | . | . | . |
| productivity | . | . | . | . | . |
3. Research Project
Go to your local supermarket with pen and paper. Choose three products from the following list and find the answers to the questions below.
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- How many producers sell this specific product in the supermarket?
- How many different brand names does each competing firm sell in the supermarket?
- What are the prices of each brand name item?
- How much shelf space does each seller get in the store? Does this affect market share? Does it affect price? Explain your answers.
- What happens to sales if the supermarket has a sale on the product or brand name you are investigating? How does a sale affect substitutes?
- How many supermarkets are there in a two-mile radius of the store you are using for research? Does this have an effect on prices? Why?
| Reading for this lesson | Teacher's Notes | Further Investigations | Economic Studies Index |