Supply and Demand are Critical to Our Economy in Adam Smith's The Wealth of a Nation

Everyday individuals and nations have the desire to be wealthier than what the previous generation had been. The whole desire of anybody is to better themselves in regards to their own rational self-interest. Adam Smith lays the ground work of how supply and demand is critical to the economy in The Wealth of Nations.

Smith contends that the greatest improvement to the economy is labor can be divided among those who are skilled in that business. He then brings an example to illustrate of a pin maker to illustrate this point, a man that does the whole thing will not be as efficient and it renders him incapable to work in a different industry. However, when a man specializes in a specific part of an industry, more people are going to be hired. Instead of one man doing all the work, but five people can be hired to do the work, with a great output of the product.

Smith then goes on to say that the division of labor can added in any important industry, not just a trivial one such as pin-making. That when an industry decides to divide increases the productive powers of the firm. This division only occurs in a society with a high degree of industry and improvement. When labor is divided there is an increase in the quantity of the work due to the dexterity of the normal workman, saving time, and invention to make more efficient use of resources. Labor is divided it opens the market leads the society to be opened up to everybody. An individual can trade his services and he is able to buy other goods from another tradesman.

Smith then moves onto the reason on what gives to the rise of division of labor.

Smith then moves onto to say that capital is the most important asset that an industry can give no matter how much it is regulated. E...

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...es and the quantity demanded to be beneficial to each individual which will in turn make it better for the whole community. The invisible hand plays a huge role in allowing the market to reach its equilibrium.

Adam Smith in the book The Wealth of Nations, lays out how is the best way for a nation to better their selves. It does not come from looking out for their fellow brethren, but rather looking out for themselves in the market. Second, labor is used efficiently when the natural talents of man is used to their best possibilities. Labor divided is more efficient because it allows time and skills to come together and create a market. A market that can increase its output while also increasing the economic pie at the same time. Lastly, free trade is all around good for the economy because it allows absolute and comparative advantages to play a role in the market.