11. What does Adam Smith mean by wealth? Why is this so significant?

Expert Solution

Adam smith referred wealth as "the annual produce of the land and labour of the society". This "produce" is, at its simplest, that which satisfies human needs and wants of utility. In other words he considered wealth to those goods which satisfy human wants. But all goods which satisfy human wants are not wealth, such as air & sunlight which are essential for us. But they are not regarded as wealth. He considers only those goods which are relatively scarce and have money value as wealth.

Adam smith was of the view that economics was concerned with the problems arising from wealth-getting and wealth-using activities of people. Adam smith thought that that wealth is the only important factor in human society. It can fulfill all the desires of human being in society. He also assumed that the entire efforts of human society is found to be directed towards earning more and more wealth. He was of the view that wages earned by active human resources is to be the only one and most important source of income of a nation.

Rahul Sunny answered 2 years ago

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