History of Economic Thought

HISTORY
ECONOMIC THOUGHT
PANGASINAN STATE UNIVERSITY
LINGAYEN CAMPUS
Lingayen, Pangasinan
JAMESON N. ESTRADA
Pangasinan State University
WORKTEXT
OF

PREFACE
History of Economic Thought with the course code Econ 126 deals with the
economic theories, ideologies and concepts of thinkers and economists who formulated
them. It is a study of the major figures and trends in the history of economic ideas,
how these ideas were formulated, utilized and transmitted, the character and scope
of economic ideas in their relationship to other areas of human experience and study.
To ensure the course objectives would be achieved, a need for a teaching resource
material is necessary. Thus, this worktext has been prepared.
This worktext is intended for use by students of AB Economics program taking up
the subject Econ 126 with the objective of providing them with a comprehensive study
about the history of economic thought to develop an understanding, analysis and
appreciation on the evolution of economic theories and ideas of different economic
thinkers from the ancient time to the present day. Likewise, it has been designed as
an instrument for learning development and assessment, providing students with
a practical approach to applying the knowledge learned in the lectures. Each
worktext covers exercises that is built upon the lessons of the following chapters
● Introduction to History of Economic Thought
● Early Economic Thought
● Mercantilism and Physiocracy
● Classical Economic Thought
● Marxian and Socialist Economic Thought
● Neoclassical Economic Thought
● Institutional Economic Thought
● Austrian School of Economic Thought
● Keynesian Economic Thought
● Other School of Economic Thought
● Philippine Economic Thought
Bear in mind that it takes sustained effort – and some dedicated patience – to study
and learn the subject. But, it is assured that the effort is well worth it. It is hoped this
modest work helps you. So, the best of luck as you begin your journey in answering
the worktext exercises!
2

CONTENTS
INTRODUCTION TO HISTORY OF ECONOMIC THOUGHT
EARLY ECONOMIC THOUGHT
INSTITUTIONAL ECONOMIC THOUGHT
MERCANTILISM AND PHYSIOCRACY
CLASSICAL ECONOMIC THOUGHT
MARXIAN ECONOMIC THOUGHT
NEOCLASSICAL ECONOMIC THOUGHT
AUSTRIAN ECONOMIC THOUGHT
OTHER SCHOOLS OF ECONOMIC THOUGHT
KEYNESIAN ECONOMIC THOUGHT
4
3
7
10
15
19
23
28
31
35
39

EXERCISE 1
Fill in the blanks. Write the correct answer on the blank provided
for to complete each of the following statements.
1. The ____________ deals with different thinkers and
theories in the subject that became economics from
the ancient world to the present day.
2. The principal fact about Economics that people must
always remember is that it is a ____________ science.
3. ____________ is the study of economies or economic
phenomena in the past.
4. The earlier name for economics is ____________.
5. The word economics originates from the Greek word
____________ which means “household management”.
6. The Greek word ‘nomia’ from which economics is
originated means ____________.
7. The ancient ____________ philosophers were among
the first to write about economics.
8. In ancient times, Economics was not a separate
discipline, but part of ____________.
9. Economic science became popularized in the shorter
form of ____________.
10. The broad definition of economics given by
____________ remains the most popular one in use
today.
11. ____________ defines economics as a study of wealth
and considered to be the founding father of modern
economics.
12. ____________ is not a history of what actually happened
in the past but rather a history of theories about how the
economy works.
13. Theory and historical processes are ____________
interconnected.
14. The central point in ____________ definition of
economics is wealth creation.
15. ____________describes the variety of approaches in the
history of economic theory.
EXERCISE 2
Classification. Determine whether each of the following is a
concern of economic history or history of economic thought. Write
EH for economic history and HET for history of economic thought.
16. The causes of Great Depression in the 1930s.
__________
17. Adam Smith's vision of a free market economy, based
on private property, capital accumulation and division of
labor. __________
18. The impact of 1997 financial crisis that gripped much of
Asian countries. __________
19. The transition of Philippine economy from one based on
agriculture to one based more on services and
manufacturing. __________
20. The economic policies and reforms implemented during
the administration of George Bush in USA. __________
21. The impact of Martial law on the economy of the
Philippines. __________
22. The idea behind the Say’s Law describing "Supply
creates its own demand". __________
23. The law of comparative advantage formulated by David
Ricardo which is a fundamental argument in favor of free
trade among countries. __________
24. The historical changes in the economy of South Korea.
__________
25. The criticism of Karl Marx against the capitalist system,
which he described as exploitative and alienating.
__________
26. History of the European economy from 1950 – 2,000
__________
27. The important work in economics of Thoman Mun, a
mercantilist in the 17th century. ________
28. The economic theories present in David Ricardo’s book,
The Principles of Political Economy__________
29. Keynes' teaching which is reflected in governmental
attempts to control the business cycle by putting money
directly into the economy. __________
30. The doctrine of marginal utility, which asserts that the
value of an item is determined by the need its relative
scarcity or abundance at any given time. __________
Republic of the Philippines
Lingayen Campus
WORKTEXT 1 : INTRODUCTION TO ECONOMIC THOUGHT
Econ 126 – History of Economic Thought
NAME: _______________________________________ SCORE: ___________________________________
YEAR AND COURSE: ___________________________ DATE: ____________________________________
4

EXERCISE 3
Classification. Determine the economist who gives each of the
propositions on the definition of economics.
Adam Smith (Wealth definition)
Alfred Marshall (Material welfare definition)
Lionel Robbin (Scarcity definition)
Paul Samuelson (Modern Growth-Oriented Definition)
31. Economics looks into of how to make a nation wealthy.
__________
32. Economics concerns on the ordinary business of life.
__________
33. Economics considers the supreme importance of man in
the economic system. __________
34. Economics examines the alternative uses of scarce
resources. __________
35. Economics analyzes the costs and benefits of improving
patterns of resource allocation. __________
36. Economics looks into ways and means of increasing the
wealth of a country. __________
37. Economics stresses that resources are limited and wants
are unlimited. __________
38. Economics is a science of choice. __________
39. Economics deals with how limited resources are utilized
for the maximum satisfaction. __________
40. Economics concerns with the distribution of consumption
among various persons and groups in a society.
__________
EXERCISE 4
Match the economists with their respective schools of economic
thought by connecting the appropriate number next to the
corresponding letter.
41. Adam Smith A. Ancient Economic Thought
42. John Maynard Keynes B. Medieval Economic Thought
43. Aristotle C. Mercantilist School
44. Francois Quesnay D. Physiocratic School
45. Thomas Aquinas E. Classical School
46. Thomas Mun F. Marxist School
47. Karl Marx G. Neoclassical School
48. Alfred Marshall H. Institutional School
49. Gunnar Myrdal I. Austrian School
50. Ludwig von Mises J. Keynesian School
EXERCISE 5
Provide a concise explanation of the following definitions of
economics provided by different economists.
51. “In economics, hope and faith coexist with great scientific
pretesion and also a deep desire for respectability”. John Kenneth
Galbraith Canadian-US economist (1908–2006).
___________________________________________________
___________________________________________________
___________________________________________________
___________________________________________________
52. “The first lesson of economics is scarcity: there is never
enough of anything to satisfy all those who want it. The first lesson
of politics is to disregard the first lesson of economics”.
Thomas Sowell US economist (1930)
___________________________________________________
___________________________________________________
___________________________________________________
___________________________________________________
53. “The purpose of studying economics is …to learn how to avoid
being deceived by economists”. Joan Robinson UK economist
(1903–1983)
___________________________________________________
___________________________________________________
___________________________________________________
___________________________________________________
54. Economics is, at root, the study of incentives: how people get
what they want, or need, especially when other people want or
need the same thing. Steven D. Levitt Stephen J. Dubner US
economists (1967– and 1963).
___________________________________________________
___________________________________________________
___________________________________________________
___________________________________________________
55. Economics is a “dismal science” that is “dreary, desolate,
and, indeed, quite abject and distressing. Thomas Carlyle,
Scottish historian 19th
century.
___________________________________________________
___________________________________________________
___________________________________________________
___________________________________________________
5

EXERCISE 6
Economist Finder. Search horizontally, vertically and diagonally
for all the fifteen economists who formulated and developed
different economic theories and economic thought from ancient to
contemporary times. Underline the economists found in the search
puzzle and write the names on the space provided for below.
56. __KARL MARX_______________________
57. ____________________________________
58. ____________________________________
59. ____________________________________
60. ____________________________________
61. ____________________________________
62. ____________________________________
63. ____________________________________
64. ____________________________________
65. ____________________________________
66. ____________________________________
67. ____________________________________
68. ____________________________________
69. ____________________________________
70. ____________________________________
EXERCISE 7
Indicate the school of economic thought of the following
economists and outline two of their economic theories or ideas
that contributed to the history of economic thought. Use the space
provided for below.
D A V I D J A M E N U M S A M O H T
H I S L A O J E A N B A P D U D L O
U Y V L T H S E B E N T H A M N D A
M T T A E N D L L E O N W A L R A S
E L H H D M J T O L I T S E A R W E
G L O S P A A O C K Z V C C A R L M
U I M R A Y M T O S A G I D E A N E
N M A A U N E S J W Y R Q S M I T N
E T S M L A S I M G D H L K A Y D G
Y R M D S R O R E I S I P M O F X E
A A A E A D N A V O T B I G A D E R
G U L R M K E A D H G H S L O R N A
N T T F U E D S J E R E M Y R T X D
I S H L E Y E S T R A D A D F R E L
L N U A L N W I L L I A M P E T T Y
U H S S S E S A L A Z A R C O N T E
S O L K O S A N I U Q A S A M O H T
P J Y A N S E U Q S I O C N A R F M
Economist
School of
Economic
thought
Contributions to
Economic Thought
71. Jean-Baptiste
Say (1767–1832)
72. Adam Smith
(1723–1790)
73. Vilfredo Pareto
(1848–1923)
74. Friedrich Engels
(1820–1895)
75. Paul Krugman
(1953)
76. Jeremy Bentham
(1748–1832)
77. John Maynard
Keynes (1883 –
1946)
78. John Stuart Mill
(1806–1873)
79. David Ricardo
(1772–1823)
80. Thomas Malthus
(1766–1834)
6

Private property
Wealth
Division of labor GovernmentDemocracy
Wants
MoneyEfficiency
Labor
Economy
Just price
Market
Public administration
Monopoly Labor theory of valueConsumption
Production
Scarcity
Jurisprudence
Utility Usury
EXERCISE 1
Modified True or False. Determine whether each of the following
statements is true or false. Write the answer on the blank after the
number.
1. Ancient economic thinkers lived from from 5th
to 15th
century. ___________
2. Arthashastra is an ancient Indian treatise by Chalukya
that argues for an autocracy managing an efficient and
developed economy. ____________
3. The Oeconomicus is a systematic treatment of the
administration of an industrialized estate, emphasizing
human capital and organizational efficiency.
____________
4. Fan Li is an Indian thinker well-known for his "Golden
Rules of Business Success". ____________
5. Plato’s dialogue, “The Republic” contained references to
specialization of labor and production. ____________
6. “The more useful or desirable a good is, the higher the
value of the means of production is” according to
Aristotle. ____________
7. Aristotle disapproved highly of usury and also cast scorn
on making money through monopoly. ____________
8. Aristotle rejects labor as the source of wealth.
____________
9. Aristotle declares that property is best left in private
hands than in public hands. ____________
10. Thomas Aquinas reasoned that it was not
a moral obligation of businesses to sell goods at a just
price. ____________
11. Summa Theologica is the magnum opus of Thomas
Malthus which deals with the concept of just price.
____________
12. Early Muslim economists understand the power of supply
and demand , stating "If desire for goods increases while
its availability decreases, its price rises. ____________
13. Al-Ghazali is considered as the father of modern
economics of the Muslim world. ____________
EXERCISE 2
Identification. Match the statements below to the items inside
the following box. Write your answer on the blank provided.
14. The mechanism within which voluntary exchange takes
place. ____________
15. The right of persons and firms to own or control land,
capital, and other forms of property. ____________
16. A theory that attempts to set standards of fairness in
transactions. ____________
17. A method used by ancient people to categorize different
jobs, and divide them to skilled members of a society.
____________
18. The study of government decision making and
implementation of government policies. ____________
19. The natural process of obtaining things with utility that
can satisfy life’s wants and needs. ____________
20. The value of a good is related to the labor needed to
dproduce or obtain that good. ____________
21. Payment for the use of money in a transaction that
results in gain for the lender. ____________
22. The rule of the people encompassing social and
economic conditions that enable the free and equal
practice of political self-determination. ____________
23. These are unlimited desires that a person would like to
have. ____________
24. A measure of total satisfaction derived by a person from
consuming a good or service. ____________
25. The abundance of valuable resources or material
possessions. ____________
Lingayen Campus
WORKTEXT 2 : EARLY ECONOMIC THOUGHT
NAME: _______________________________________ SCORE: ___________________________________
7

EXERCISE 3
Picture Match. Match each of these economists with his profile
picture. Write the letter of you answer in the blank provided before
the number
26. Aristotle
27. Plato
28. Xenophon
29. Chanakya
30. Fan Li
31. Al-Ghazali
32. Ibn Khaldun
33. Abu Yusuf
34. Thomas Aquinas
35. Duns Scotus
EXERCISE 4
Identification. Identify the magnum opus of the following early
economic thinkers. Write the answer in the blank provided after the
number.
36. Aristotle _____________________________________
37. Plato ________________________________________
38. Xenophon ___________________________________
39. Chanakya ____________________________________
40. Fan Li _______________________________________
41. Al-Ghazali ____________________________________
42. Ibn Khaldun ___________________________________
43. Abu Yusuf ___________________________________
44. Thomas Aquinas ______________________________
45. Duns Scotus __________________________________
EXERCISE 5
Classification. Determine the early economic thinker
responsible for each of the following economic thought and ideas.
Write he answer on the blank provided after the item.
46. Consumption was the objective of production, and the
surplus should be allocated to the rearing of children,
and personal satiation ought to be the natural limit of
consumption. ____________
47. Just price, which he considered necessary for the
reproduction of the social order. ____________
48. There are three sources of wealth: individual earnings;
profit from exchange, and acquisition by bequest or
discovery. ____________
49. To sell a thing dearer or to buy it cheaper than it is worth
is, in itself, unjust and illicit. ____________
50. The relationship between tax rates and tax revenue
increases as tax rates increase for a while, but then the
increases in tax rates begin to cause a decrease in tax
revenues as the taxes impose too great a cost to
producers in the economy. ____________
51. The seasonality’s effect on the market demand and
supply and their implications on prices. ____________
52. Businesses owned by responsible and organized
merchants shall eventually surpass those owned by
wealthy rulers. ____________
53. Population growth was directly a function of wealth.
____________
54. The use of tax revenues for socioeconomic
infrastructure, and included discussion of various types
of taxes, including sales tax, death taxes, and import
tariffs. ____________
55. The optimum state is a rigid, static, ideal construct from
which any deviation whatsoever is considered to be
regressive. ____________
56. Exchange as a bilateral process in which both parties
would be better off as a result of the exchange.
____________
57. A conducive atmosphere is necessary for the state's
economy to thrive. This requires that a state's law and
order be maintained. ____________
58. Price varies with wants. ____________
59. Poverty as a state in which someone does not have that
which he desires, so that indigentia could be applied to
"luxuries" as well as "necessities". ____________
60. Effective demand is desire backed by ability to pay.
____________
A B
B
C D
E F
J H
I J
8

EXERCISE 6
Timeline Activity. Arrange the following events or actions
chronologically relating to early economic thought. Indicate A as
the first event and J is the last event.
61. Jean Buridan maneuvered the Scholastic notion of
indigentia much closer to the modern concept of effective
demand.____________
62. Chanakya's Arthashastra, the earliest known treatise on
economic principles and guidelines for a progressive
economy was written. ____________
63. The Oeconomicus was written by Xenophon which is
considered as one of the earliest works on economics in
its original sense of household management.
____________
64. Plato describes his ideal state, where property is owned
by all and labor is specialized. ____________
65. Aristotle argues in favor of private property but against
accumulating money for its own sake. ____________
66. Al-Ghazali classified economics as one of the sciences
connected with religion, along with metaphysics, ethics,
and psychology. ____________
67. Thomas Aquinas argues that owning property is natural
and good, but private property is less important than the
public good. ____________
68. The work of Duns Scotus, “Sententiae” was published.
____________
69. Ibn Khaldun formulated the labor theory of value that
preoccupied the classical economists of the eighteenth
and nineteenth centuries. ____________
70. French philosopher Nicole Oresme wrote a work on the
medieval conception of money. ____________
EXERCISE 7
Essay. Briefly explain the following.
71. Explain Plato’s theory of the ideal state.
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
72. Contrast and compare Plato and Aristotle’s view on the
desirability of private property.
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
73. Discuss Aristotle’s distinction between needs and
wants.
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
74. Explain Aristotle’s ideas on the appropriateness of
economic activity.
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
75. Explain economic principles present in Xenophon’s
Oeconomicus.
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
76. Give one economic idea each of Indian and Chinese
early economic thinkers.
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
77. Explain the idea of Ibn Khaldun on economic growth.
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
78. Explain the concept of just price.
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
79. Explain the evolving concept of usury and show how
this concept is still used in our society.
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
80. Explain how does Duns Scotus criticize the Thomas
Aquinas’ perspective of just price.
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
9

EXERCISE 1
True or False. Determine whether each of the following
statements is true or false. Write the answer on the blank after the
number.
1. Mercantilism is a pre-classical economic thought,
according to which the prosperity of nations is reached
by promoting agriculture. ________
2. Physiocratic school of economics focuses on
accumulation of gold and balance of trade. ________
3. Mercantilism is developed only in France during a shorter
period than physiocracy. ________
4. Physiocrats impose high tariffs especially on
manufactured goods. ________
5. Land is the most important resource of a nation in
mercantilistic point of view. ________
6. Mercantilism is severely criticized by the advocates
of laissez-faire. ________
7. Trade balance is favorable if there is an excess of exports
over imports. ________
8. The goal of economic activity, according to mercantilists,
was production, not consumption. ________
9. Mercantilists views the economic system as a zero-sum
game, in which any gain by one party required a loss by
another. ________
10. Export represent money coming into the country and
import represents money going out. ________
11. In a mercantilists’ point of view, the control of the
government is essential for the attainment of favorable
balance of trade. ________
12. One of the most notable mercantilists is Thomas Mun
from United States. ________
13. The last major mercantilist work is David
Ricardo's Principles of Political Economy published in
1767. ________
14. Tariff should be used to encourage exports and
discourage imports. ________
15. Economic Table is an economic model first described
by William Petty in 1759 laid the foundation of the
Physiocrats’ economic theories. ________
EXERCISE 2
Identification. Match the statements below to the items inside
the following box. Write your answer on the blank provided for.
16. Difference between the value of exports and imports of
output in an economy ____________
17. Domestic products sold to the rest of the world
____________
18. Imported products bought from the rest of the world
____________
19. Wealth is determined by the amount of precious metals
possessed ____________
20. Trade of goods and services without trade barriers with
free access to markets and market information
____________
21. Economic policy of restraining trade between nations
through trade barriers ____________
22. Course of action by the government that is intended to
influence or control the behavior and performance of the
economy ____________
23. Tax levied on imports or exports ____________
24. Used as currency that derives its value from government
regulation or law ____________
25. Cultivation of plants and animals used to sustain life
____________
26. Measure of output produced from a production process,
per unit of input used. ____________
Private property
Wealth
Division of labor GovernmentDemocracy
Wants
MoneyEfficiency
Labor
Economy
Just price
Market
Public administration
Monopoly Labor theory of valueConsumption
Production
Scarcity
Jurisprudence
Utility Usury
Lingayen Campus
WORKTEXT 3 : MERCANTILISM AND PHYSIOCRACY
NAME: _______________________________________ SCORE: ___________________________________
10

27. Decrease in the marginal output of a production process
as the quantity of a single input is increased.
28. Philosophy stressing the moral worth of an individual
____________
29. Factor of production encompassing all natural resources
such as forest, water and mineral deposits
____________
30. Distribution of land from the rich to the poor or landless
__________
EXERCISE 3
Classification. Determine whether the following statements
pertains to mercantilism or physiocracy. Write M for mercantilism
and P for physiocracy.
31. The wealth of nations is derived solely from productive
work or the value of land agriculture. ________
32. Colonies and territories are established for greater
accumulation of wealth. ________
33. Export is important than import. ________
34. Foreign trade is the paramount motive for ensuring the
prosperity and security of the nation. ________
35. Manufacturing industries are seen superior and more
relevant than agriculture. ________
36. All imports of foreign goods be discouraged as much as
possible. ________
37. Production of goods and services is viewed as
consumption of the agricultural surplus. ________
38. Capital is needed to sustain the laborers while they
produced their product. ________
39. Wealth came from self-interest and markets are
connected by money flows. ________
40. Land is the most important resource of a nation and labor
is the sole source of value. ________
41. A strong nation should have large population to provide
a supply of labor, a market, and soldiers. ________
42. Human wants should be minimized, especially for
imported luxury goods, for they drained off precious
foreign exchange. ________
43. There should be a single and direct tax on land, as it is
the only productive source. ________
44. Trade is a necessary evil, and there should be free trade.
________
45. If one country has more gold than another, it was
necessarily better off. ________
EXERCISE 4
Timeline Activity. Arrange the following events chronologically
relating to economic thought of mercantilists and physiocrats.
Indicate A as the first event and J is the last event.
46. Gerard de Malynes argues that England should regulate
foreign exchange to stop the nation’s gold and silver
from going abroad. ________
47. Thomas Mun advocates a mercantilist policy, using
foreign exports as a way of increasing a nation’s wealth.
________
48. William Petty shows how the economy can be measured
in Quantulumcunque Concerning Money. ________
49. John Locke states that what you create by your own
labor is yours by right. ________
50. Dudley North argues that the main spur to increased
national wealth is consumption. ________
51. David Hume argues that public goods should be paid for
by government. ________
52. Richard Cantillon’s Essay, discusses the circulation of
money from the city to the countryside. ________
53. Physiocrats argue that land and agriculture are the only
sources of economic prosperity. ________
54. Quesnay produces his Economic Table, the first
analysis for the workings of a macroeconomy. ________
55. Adam Smith criticized and rejected the mercantilists
arguing that consumption was paramount to production.
________
EXERCISE 5
Classification. Identify the mercantilist or physiocrat who is
credited for each of these these economic thoughts/statements.
56. Trade was the only way to increase nation's treasure or
national wealth. ___________
57. To inspect the country's soil with the greatest care, and
not to leave the agricultural possibilities of a single
corner or clod of earth unconsidered. ___________
58. It is solely the abundance of money within a state which
makes the difference in its grandeur and
power.___________
59. There are two functions of money, as a "counter" to
measure value, and as a "pledge" to lay claim to goods.
___________
60. Ownership of property is a natural right and is derived
and created by the application of labor. ___________
61. As far as money is concerned, the demand is exclusively
regulated by its quantity. ___________
62. Goods with inelastic demand should be exported
because more money could be made from higher prices.
___________
11

63. All raw materials found in a country must be used in
domestic manufacture, since finished goods have a
higher value than raw materials. ___________
64. There is proportionate relationship between money
supply and price level, keeping volume of trade and
velocity of money constant. ___________
65. Capital was regarded as a dependent factor produced
jointly by land and revenue. ___________
66. Necessity is defined as the uniformity, observable in the
operations of nature; where similar objects are constantly
conjoined together. ___________
67. Individual ownership of goods is justified by the labor
exerted to produce those goods to produce goods
beneficial to society. ___________
68. Entrepreneurs are non-fixed income earners who pay
known costs of production but earn uncertain incomes.
___________
69. The economic system consists of three economic
movers: proprietary class, productive class and sterile
class. ___________
70. Agriculture is so valuable because it works with nature—
which multiplies the farmer’s effort and resources to
produce a net surplus. ___________
EXERCISE 6
Matching Type. Match each economist with his magnum opus to
the right. Write the answer in the box before each number.
71. James Steuart A. England’s Treasure by Foreign Trade
72. Richard Cantillon B. Political Arithmetic
73. Leonardus Lessius C. On Justice and Law
74. Jean Bodin D. An Essay of the East India Trade
75. Thomas More E. Utopia
76. Thomas Mun F. Two Treatises of Government
77. William Petty G. Principles of Political Economy
78. Charles Davenant H. Essay on the Nature of Trade
79. John Locke I. Reply to Malestroit
80. Dudley North J. A Treatise of Human Nature
81. David Hume K. Economic Table
82. Jacques Turgot L. Testament Politique
83. Bernard Mandeville M. Discourses upon Trade
84. Francois Quesnay N. Fable of the Bees
85. Victor de Riqueti O. Reflection on the Formation of Wealth
EXERCISE 7
the number.
86. Thomas Mun
87. Pierre Samuel du
Pont de Nemours
88. Francois Quesnay
89. Jean Baptiste
Colbert
90. Thomas More
91. William Petty
92. Dudley North
93. Jean Bodin
94. John Law
95. David Hume
96. Jacques Turgot
97. John Locke
98. Philip Von Hornick
99. Bernard
Mandeville
100.James Steuart
101.Pierre Le Pesant
102.Leonardus
Lessius
103.Victor de Riquetti
104.Richard Cantillon
105.Charles Davenant
A B
C D
E F
G H
I J
K L
M N
O P
Q R
S T
12

EXERCISE 8
Briefly explain what is asked.
106.Give two relevant contributions made by mercantilists
and the physiocrats to economic theory.
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
107.Explain the economic ideas of the mercantilists about
foreign trade.
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
108.Write an essay explaining the various economic policies
of the mercantilists.
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
109.Discuss the economic contributions of William Petty to
the field of economic theory.
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
110.What are the factors responsible for the rise of
Physiocracy?
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
111.Explain the economic ideas and principles of the
physiocrats.
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
112.Contrast and compare the mercantilist and physiocratic
approaches to analyzing an economy.
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
`
113.Discuss the "Tableau économique" (Economic Table) of
François Quesnay which gives the basic foundations of
ideas of the physiocrats.
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
114.Explain the economic idea of Jacques Turgot on
diminishing returns.
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
`
115.What are the criticisms levelled against mercantilism by
classical economists especially Adam Smith?
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
13

EXERCISE 9
Creative Work. In a collage or drawing, explain and illustrate any
key principles of economic thought that can be elucidated from the
following poem entitled “The Fable of the Bees” (1705) by Bernard
Mandeville. Use the provided two boxes for your work.
The Fable of the Bees
Bernard Mandeville
A Spacious Hive well stocked with Bees,
That lived in Luxury and Ease;
And yet as famed for Laws and Arms,
As yielding large and early Swarms;
Was counted the great Nursery
Of Sciences and Industry.
No Bees had better Government,
More Fickleness, or less Content.
They were not Slaves to Tyranny,
Nor ruled by wild Democracy;
But Kings, that could not wrong, because
Their Power was circumscribed by Laws.
The 'hive' is corrupt but prosperous,
yet it grumbles about lack of virtue.
A higher power decides to give them
what they ask for: But Jove, with Indignation moved,
At last in Anger swore, he'd rid
The bawling Hive of Fraud, and did.
The very Moment it departs,
And Honesty fills all their Hearts;
This results in a rapid loss of prosperity,
though the newly-virtuous hive does not mind:
For many Thousand Bees were lost.
Hardened with Toils, and Exercise
They counted Ease it self a Vice;
Which so improved their Temperance;
That, to avoid Extravagance,
They flew into a hollow Tree,
Blest with Content and Honesty
Principles and Insights of Economic Thought
_________________________________________________
_________________________________________________
_________________________________________________
_________________________________________________
_________________________________________________
_________________________________________________
_________________________________________________
_________________________________________________
Collage or Drawing
14

EXERCISE 1
True or False. Write True if the statement is correct and False if it
is incorrect.
1. Classical economics is widely accepted as the first
modern school of economic thought. __________
2. Famous economists of the socialist school of economic
thought include Adam Smith, David Ricardo, Thomas
Malthus and John Stuart Mill. __________
3. Adam Smith is often considered as the father of modern
economics. __________
4. In a free market, prices of goods and services are
determined by the market. __________
5. The Wealth of Nations emphasizes sympathy for others.
__________
6. Smith and Ricardo are both opponent of protectionism for
national economies. ________
7. Malthus is the first economist to propose a systematic
theory of population. __________
8. Malthus argues that population increases geometrically
and food supply increases arithmetically. __________
9. According to Say’s law, supply always equals demand.
__________
10. In Smith’s view government has an important role in
providing public goods that private markets are unlikely
to provide. __________
11. The idea of absolute advantage suggests that two
countries will both gain from trade if they have different
relative costs for producing the same goods__________
12. As more people work on a fixed amount of land, less and
less output is added. __________
13. Ricardo expresses the relationship among the three
factors of production: land, labor and income.
14. Competition is key to the inefficient working of free
markets. __________
15. In his Theory of Profit, Ricardo states that as real wages
increase, real profits decrease because the revenue from
the sale of goods is split between profits and wages.
__________
EXERCISE 2
Crossword Puzzle. Complete the following crossword puzzle by
identifying the key principles in classical economic thought below.
16 17 18
19
S
20 21 22
23
23
25 26
27
28
29 30
31
32 33
34 35
16. An economic system in which there is minimal
intervention or regulation from government.
17. The ability of a firm or country to produce more of a good
than others using the same amount of resources.
18. Self-regulating nature of the marketplace.
19. The notion of firms striving for a greater share of a
market to sell goods and services.
20. Amount of payments to all inputs used in producing a
given quantity of output.
21. A process by which government raises revenues to
defray its necessary expenditures.
22. This is characterized by the private ownership of
resources and the use of a system of markets and prices
to coordinate and direct economic activity.
23. A measure of satisfaction, referring to the total
satisfaction received by a consumer from consuming a
good or service.
Lingayen Campus
WORKTEXT 4 : CLASSICAL ECONOMIC THOUGHT
NAME: _______________________________________ SCORE: ___________________________________
15

24. The transfer of ownership of goods and services from one
person or entity to another.
25. The physical and mental effort that people devote to
producing goods and services.
26. The income received from using land resource.
27. This refers to produced goods that can be used as
resources for further production.
28. A place where buyers and sellers meet for exchange of
goods or services.
29. __, __, __, __, __, __, ment, the amount purchased per
unit time of goods which are not consumed but are to be
used for future production.
30. The willingness or ability of an individual to buy a
particular good.
31. Resource payment received by workers in exchange for
their labor.
32. Income not spent, or deferred consumption.
33. The difference between a firm's total revenue and total
cost.
34. A thing that is necessary for survival.
35. These are concepts associated with a specific change in
the quantity used of a good or service.
EXERCISE 3
Identification. Identify the magnum opus of each of the following
classical economists. Write the answer in the blank provided after
the number.
36. Adam Smith __________________________________
37. David Ricardo_________________________________
38. Thomas Malthus ______________________________
39. Jean-Baptiste Say _____________________________
40. John Stuart Mill _______________________________
41. Jeremy Bentham ______________________________
42. Henry Charles Carey ___________________________
43. Henry Thornton _______________________________
44. Pierre-Joseph Proudhon ________________________
45. Frederic Bastiat _______________________________
46. Edmund Burke _______________________________
47. Jean Charles Léonard de Sismondi _______________
48. Robert Owen _________________________________
49. Thomas Tooke ________________________________
50. Alexander Hamilton ____________________________
EXERCISE 4
the number
51. Adam Smith
52. David Ricardo
53. Thomas Malthus
54. John Stuart Mill
55. Edmund Burke
56. Jean-Baptiste Say
57. Henry Thornton
58. Henry Charles
Carey
59. William Godwin
60. Alexander Hamilton
61. Henry Clay
62. Mathew Carey
63. Wilhelm Roscher
64. Charles Gide
65. Robert Owen
66. Jeremy Bentham
67. George Wilhelm
Friedrich Hegel
68. James Mill
69. Pierre-Joseph
Proudhon
70. Frederic Bastiat
A B
C D
E F
G H
I J
K L
M N
O P
Q R
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16

EXERCISE 5
Smith vs. Ricardo. Determine whether the following economic
thought is credited for Smithian economics or Ricardian
economics. Write S for Smithian economics and R for Ricardian
economics.
71. Rational self-interest and competition can lead to
economic prosperity. ________
72. Productive labor should be made even more productive
by deepening the division of labor. ________
73. The recovery of a great foreign market will generally more
than compensate the transitory inconvenience of paying
dearer during a short time for some sorts of goods.
________
74. The rich should contribute to the public expense, not only
in proportion to their revenue, but something more than
in that proportion. ________
75. Comparative advantage is a specialization technique
used to create more efficient production. ________
76. The relative price of two goods is determined by the ratio
of the quantities of labour required in their production.
________
77. Wages should be left to free competition, so there should
be no restrictions on the importation of agricultural
products from abroad. ________
78. Profits depend on high or low wages, wages on the price
of necessaries, and the price of necessaries chiefly on
the price of food. ________
79. Consumption is the sole end and purpose of all
production. ________
80. Humans, in his view, were social creatures who act with
moral restraint, using “fair play” in competition.________
81. If the government does not do anything, there’s a
controlling factor of people themselves who can guide
markets. ________
82. The value of a good or service is dependent upon the
labor used in its production. ________
83. The more specialized the workers and businesses, the
greater the market growth and the higher the returns on
investments. ________
84. Competition is key to the efficient working of free
markets. ________
85. There is no perfect measure of value, since any measure
chosen varies with fluctuations in wages and profit rates.
________
EXERCISE 6
Economic Thought. Identify the classical economist credited for
each of these principles of economic thought.
86. Opportunity cost __________
87. Supply creates its own demand__________
88. Rent theory __________
89. Invisible hand __________
90. Labor theory of value __________
91. Division of labor
92. Free market __________
93. Comparative advantage __________
94. Absolute advantage __________
95. Paradox of value __________
96. Law of Diminishing returns __________
97. Minimum wage __________
98. Utility __________
99. Reciprocal demand __________
100.Theory of market __________
EXERCISE 7
chronologically relating to history of the classical school of
economic thought. Indicate A as the first event and J is the last
event.
101.Adam Smith’s classic work, An Inquiry into the Nature
and Causes of the Wealth of Nations is published.
_________
102.Jeremy Bentham sets out his theory of utilitarianism; its
goal is “the greatest happiness of the greatest number.
_________
103.English philosopher William Godwin advocates the
redistribution of national resources to help the poor.
_________
104.Edmund Burke criticizes state involvement in the
regulation of wages and prices. _________
105.Thomas Malthus warns of the danger of population
outstripping resources and the suffering that this will
bring. _________
106.Jean-Baptiste Say claims or proposes that the market
will balance supply and demand naturally. _________
17

107.David Ricardo lays the foundations for 19th-century
classical economics, advocating free trade and the
specialization of labor. _________
108.Jean Charles Léonard de Sismondi describes business
cycles and the difference between long-term growth and
short-term ups and downs. _________
109.Wilhelm Roscher founded the German Historical School
of Economics, which promoted the cyclical theory of
nations. _________
110.John Stuart Mill's textbook, Principles of Political
Economy is published which essentially summarizes of
the economic wisdom of the mid nineteenth century.
_________
EXERCISE 8
Essay. Briefly explain the thought of the following economic
insights from the classical economists.
111. Profits depend on high or low wages, wages on the price of
necessaries, and the price of necessaries chiefly on the price of
food. David Ricardo
___________________________________________________
___________________________________________________
___________________________________________________
___________________________________________________
___________________________________________________
112. Products are paid for with products and "a glut can take place
only when there are too many means of production applied to one
kind of product and not enough to another". Jean-Baptiste Say
___________________________________________________
___________________________________________________
___________________________________________________
___________________________________________________
___________________________________________________
113. The power of population is so superior to the power of the
earth to produce subsistence for man that premature death must
in some shape or other visit the human race. Thomas Malthus
___________________________________________________
___________________________________________________
___________________________________________________
___________________________________________________
___________________________________________________
114. Every individual is motivated by self-interest. Every man, so
to say, is the maximizer of gain and minimizer of loss. Adam Smith
__________________________________________________
___________________________________________________
___________________________________________________
___________________________________________________
___________________________________________________
115. Every individual is motivated by self-interest. Every man, so
to say, is the maximizer of gain and minimizer of loss. Adam Smith
___________________________________________________
___________________________________________________
___________________________________________________
___________________________________________________
___________________________________________________
116. Demand for commodities is not demand for laborers. John
Stuart Mill
___________________________________________________
___________________________________________________
___________________________________________________
___________________________________________________
___________________________________________________
117. Money performs but a momentary function in this double
exchange; and when the transaction is finally closed, it will always
be found, that one kind of commodity has been exchanged for
another. Jean-Baptiste Say
___________________________________________________
___________________________________________________
___________________________________________________
___________________________________________________
___________________________________________________
118. It is not from the benevolence of the butcher, the brewer or
the baker, that we expect our dinner, but from their regard to their
own self-interest. We address ourselves, not to their humanity but
to their self-love, and never talk to them of our own necessities
but of their advantages. Adam Smith
___________________________________________________
___________________________________________________
___________________________________________________
___________________________________________________
___________________________________________________
119. Pleasures and pains can be ranked according to their value
or "dimension" such as intensity, duration, certainty of a pleasure
or a pain. Jeremy Bentham
___________________________________________________
___________________________________________________
___________________________________________________
___________________________________________________
___________________________________________________
120. Even if a country could produce everything more efficiently
than another country, it would reap gains from specializing in what
it was best at producing and trading with other nations. David
Ricardo
___________________________________________________
___________________________________________________
___________________________________________________
___________________________________________________
___________________________________________________
18

EXERCISE 1
is incorrect.
1. Marxian economics pertains to economic principles on
the functioning of capitalism based on the works of Karl
Marx. __________
2. Karl Marx, in his Das Kapital, argues that the most
important characteristic of a market economy is that it
permits a rapid growth in productive abilities. _________
3. Das Kapital a critical analysis of socialism as political
economy. __________
4. Ernst Engel co-authored The Communist Manifesto.
__________
5. The main objective of the capitalists is to maximize profit.
__________
6. Marx argues that capitalists exploit workers by paying
them less in wages than the value they produce.
__________
7. In Marxian theory, the proletariats are wage laborers and
bourgeoisie are capitalists. __________
8. A commodity's use-value is its usefulness for fulfilling
some practical purpose. __________
9. Under the capitalist mode of production, the workers own
the necessary means of production. __________
10. Marx has broadly distinguished six different stages of
development through which the society has passed.
__________
11. Constant capital refers to the non-human inputs into
production, while variable capital refers to the human
input. __________
12. The utility of a thing makes it a use value. __________
13. The amount of labor used to produce a good is
proportional to its value according to Karl Marx.
__________
14. Marxian economics regards surplus labor as the ultimate
source of capitalist profits. __________
15. The fifth state of development according to Marx’s theory
is socialism.
EXERCISE 2
Identification. Identify each item below by referring to the
following box which contains economic concepts and theories
used in Marxian Economics. Write the answer on the space
provided for after the number.
16. __________________ refers to the actual activity or
effort of producing goods or services.
17. __________________ refers to the new value created
by workers in excess of their own labor-cost
18. __________________ the value of a commodity which
is simply related to the amount of human labor required
to produce it.
19. __________________ refers to the ability or capacity of
a person to do work.
20. __________________ refers to the labor performed in
excess of the labor necessary to produce the means of
livelihood of the worker.
21. __________________ refers to the way of producing a
good using a combination of productive forces and
social and technical relations of production.
22. __________________ refers to the human labor power
and available knowledge given the level of technology in
the means of production.
23. __________________ refers to the ratio at which
commodities should be traded for one another, but not
identical.
24. __________________ refers to means of production
plus labor.
25. __________________ refers to the class of a capitalist
society that does not have ownership of the means of
production.
Lingayen Campus
WORKTEXT 5 : MARXIAN ECONOMICS
NAME: _______________________________________ SCORE: ___________________________________
19

26. __________________ refers to the class of a capitalist
society or minority who own the means of production.
27. __________________ refers to things with the aid of
man who acts upon the subject of labor, and transforms
it.
28. __________________ refers to everything to which
man's labor is directed.
29. __________________ refers to the relations human
beings adopt toward each other as part of the production
process.
30. __________________ refers to the unemployed in
capitalist society.
31. __________________ refers to the operation whereby
profits are reinvested increasing the total quantity of
capital.
32. __________________ refers to the cost incurred in hiring
labor power. Variable capital by contrast refers to the
capital outlay on labor costs.
33. __________________ refers to the non-human inputs
into production such as fixed assets like plant, machinery,
land and buildings.
34. __________________ refers to the utility of consuming
a good.
35. __________________ refers to the generalized
commodity production in which most production is
organized for the purpose of trading the products.
EXERCISE 3
A. Classification. For each of the following, identify what factor of
production process according to Marxian theory. Write HL for
human labor, SL for subject of labor and ML of means of labor.
36. Land used for production ____________
37. Timber ____________
38. Factory buildings ____________
39. Computer assembly factory ____________
40. Machineries ____________
41. Roads and bridges ____________
42. Communications networks ____________
43. Wage workers ____________
44. Construction workers ____________
45. Coal ____________
46. Raw materials ____________
47. Semi-conductor chips in a computer assembly factory
____________
48. Number of hours of labor rendered by a worker
____________
49. Production equipment ____________
50. Crude oil ____________
B. Classification. For each of the following, identify what mode
of production process according to Marxian theory is indicated.
Write PF for productive forces and RP for relations of production.
51. Technologies ____________
52. Raw materials ____________
53. Social relation between proletariat and bourgeoisie
____________
54. Assembly tools ____________
55. Capitalist's exclusive relationship to capital
____________
56. Work associations ____________
57. Industrial plant ____________
58. Properties ____________
59. Cooperative work relations ____________
60. Relationships between different production sites
____________
C. Classification. For each of the following, determine what
stage of development a society passes through is characterized
based on Marxian theory. Write PC for primitive communism, SL
for slavery, FE for feudalism and CA for capitalism.
61. The means of production are socially owned.
____________
62. With the change in the forces of production, there was a
great increase in the demand for labor, to carry on the
new productive activities. ____________
63. A new relation of production is established.
____________
64. New institutions in the form of private ownership of land,
money, interest, etc. are developed. ____________
65. States emerged to bring about a coordination among the
divergent interests. ____________
66. The feudal lord partially owned the means of production.
____________
67. The serfs or tenants were tied to the land, but they also
owned some property. ____________
68. The capitalist owns the necessary means of production.
____________
69. Division of labor becomes more and more complex.
____________
70. There is large-scale production, centralization,
monopoly, finance capital and colonialism.
____________
20

EXERCISE 4
chronologically relating to history of the Marxian economics.
Indicate A as the first event and J is the last event
71. Karl Marx and Friedrich Engels publish the Communist
Manifesto. ____________
72. Adam Smith in his great work, The Wealth of Nations
argues that the invisible hand of the market brings order.
____________
73. Karl Kautsky edits Marx's Theories of Surplus Value.
____________
74. The USSR is established on Marxist principles under
Vladimir Lenin. ____________
75. Karl Marx publishes the first volume of Capital.
____________
76. Fidel Castro’s revolutionaries seized power in Cuba.
____________
77. Engels edit Marx's unfinished volumes of Capital after
Marx’s death. ____________
78. Mao Zedong becomes the founding father of the People’s
Republic of China. ____________
79. Austrian Economist Eugen von Böhm-Bawerk publishes
Karl Marx and the Close of his System, summarizing the
criticisms of Marx’s labor theory of value. ____________
80. Radical US economist Paul Sweezy publishes Theory of
Capitalist Development, defending Marx’s labor theory of
value. ____________
EXERCISE 5
Essay. Explain or discuss what is asked in the following.
81. For Karl Marx, the basic determining factor of human
history is economics, why?
________________________________________________
________________________________________________
________________________________________________
________________________________________________
________________________________________________
82. Differentiate the belief or perspective of Adan Smith and
Karl Marx about capitalism.
________________________________________________
________________________________________________
________________________________________________
________________________________________________
________________________________________________
83. Explain that if value is a property common to all
commodities, then whatever it is derived from, whatever
determines it, must be common to all commodities.
________________________________________________
________________________________________________
________________________________________________
________________________________________________
________________________________________________
84. Explain the theory of surplus value and illustrate one
example.
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
85. Interpret this, “Communism is for us not a state of affairs
which is to be established, an ideal to which reality will
have to adjust itself. We call communism the real
movement which abolishes the present state of things.
The conditions of this movement result from the
premises now in existence." – Karl Marx, The German
Ideology
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
86. Give details on the stages of development a society
passes through based on Marxian theory.
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
87. Discuss Marxian theory of disintegration of capitalism by
contemplating the inherent conflicts and contradictions.
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
88. Marx assumed that under capitalism there is a tendency
to produce a surplus labor force. He called it as the
‘reserve army of labor. Discuss the latter concept.
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
89. Provide 5 notable economists that follow and develop
Karl Marx's economic theory. Explain how they were
influenced by Karl Marx.
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
90. Discuss the criticisms of Marx’s Theory made by other
economists.
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
JNE 12/21/14
21

EXERCISE 9
Briefly explain what is asked.
121.Discuss the development of theory of classical
economists to investigate economic dynamics.
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
122.Explain the "invisible hand" theory of Adam Smith.
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
123.Contrast and compare Ricardo’s and Smith’s approach
and methodologies to economic theory.
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
124.State Ricardo’s theory of comparative advantage and
explain how people are made better off by free trade
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
125.Explain Ricardo’s theory of distribution and his views
about changes in the distribution of income over time
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
126.Explain and critically assess the population theory of
Thomas Malthus.
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
___________________________________________
127.Explain Say’s theory of market.
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
128.Explain Mill’s theory of reciprocal demand
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
129.Discuss the main contribution of Jeremy Bentham to
the field of economics.
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
130.Distinguish between the theory of absolute advantage
and comparative advantage.
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
JNE 12/18/14
22

EXERCISE 1
is incorrect.
1. Neoclassical economics is an approach to economics
focusing on capital accumulation and allocation of
resources. ___________
2. Neoclassical economics dominates macroeconomic
theories. ___________
3. In neoclassical school, individuals maximize utility and
firms maximize budget. ___________
4. For neoclassical economics, the value of a commodity is
determined only by its subjective scarcity. ___________
5. Alfred Marshall publishes his Principles of Economics,
bringing new mathematical approaches to economics.
___________
6. In the perfectly competitive industry price remains the
same regardless of any individual firm’s level of output.
___________
7. According to Marshall, market period is period when the
goods produced for sale on the market are taken as given
data. ___________
8. Marginalism refers to the use of marginal concepts in
economic theory. ___________
9. According to Menger, Things which can be placed in the
satisfaction of human wants are called utilities.
10. Léon Walras sets out the basis of the general equilibrium
theory, claiming that free markets are stable.
___________
11. Carl Menger made use of mathematical approach in his
economic analysis. ___________
12. Utility maximization is the source for the neoclassical
theory of consumption, the derivation of demand curves
for consumer goods. ___________
13. Vilfredo Pareto formulates Pareto efficiency, a state in
which no individual can become better off without making
another worse off. ___________
14. Carl Menger’s magnum opus is Theory of Political
Economy. ___________
15. When the prices at which the sellers are willing to sell
equal the prices at which the buyers are willing to buy,
general equilibrium is achieved. ___________
16. Neoclassical economics is criticized for having a
normative bias.
EXERCISE 2
Identification. Identify each item below by referring to the
following box which contains economic concepts and theories
used in Neoclassical Economics. Write the answer on the space
provided for after the number.
16. When the price goes up, some people buy more.
______________
17. When the income increases, demand for a good falls.
______________
18. Consumers buy more of a good when its price falls and
less when its price rises. ______________
19. An individual enjoys the last good less than the first utility
and satisfaction. ______________
20. The behavior of how the household and firms make
decisions to allocate limited resources is studied.
______________
21. Firms determine the price and output level that returns
the greatest profit. ______________
22. Different bundles of goods between which a consumer
is indifferent. ______________
23. Producers sell more of a good when its price increases
and less when its price decreases. ______________
24. People buy and consume goods to be satisfied.
______________
25. A large number of firms are selling the product to such a
large number of customers. ______________
Lingayen Campus
WORKTEXT 6 : NEOCLASSICAL ECONOMIC THOUGHT
NAME: _______________________________________ SCORE: ___________________________________
23

26. The amount of goods sought by buyers is equal to the
amount of goods produced by sellers. ______________
27. Making one person better off without hurting the others.
______________
28. People respond by buying more or less whenever the
price changes. ______________
29. Companies are price takers not price makers.
______________
30. The bigger the factory due to expansion, the lower the
cost the firm incurs. ______________
EXERCISE 3
Identification. Identify the magnum opus of the following classical
economists. Write the answer in the blank provided after the
number.
31. William Stanley Jevons
____________________________________________
32. Carl Menger
____________________________________________
33. Leon Walras
____________________________________________
34. Alfred Marshall
____________________________________________
35. John Bates Clark
____________________________________________
36. Eduard Bernstein
____________________________________________
37. Francis Ysidro Edgeworth
____________________________________________
38. Irving Fisher
____________________________________________
39. Knut Wicksell
____________________________________________
40. Joseph Louis Francois Bertrand
____________________________________________
41. Vilfredo Pareto
____________________________________________
42. Kenneth Arrow
____________________________________________
43. Arthur Cecil Pigou
____________________________________________
44. Robert Giffen
____________________________________________
45. Alexander del Mar
____________________________________________
EXERCISE 4
the number
46. William Stanley
Jevons
47. Carl Menger
48. Leon Walras
49. Alfred Marshall
50. John Bates Clark
51. Eduard Bernstein
52. Francis Ysidro
Edgeworth
53. Irving Fisher
54. Knut Wicksell
55. Joseph Louis
Francois Bertrand
56. Vilfredo Pareto
57. Kenneth Arrow
58. Arthur Cecil Pigou
59. Robert Giffen
60. Alexander del Mar
A B
C D
E F
G H
I J
K
L
M
N
O
24

EXERCISE 6
Economic Thought. Identify the neoclassical economist credited
for each of these economic thought and principles. Write your
answer on the space provided for after the item.
61. Demand curve and supply curve
____________________________________________
62. Indifference curves
____________________________________________
63. General equilibrium theory
____________________________________________
64. Edgeworth box
____________________________________________
65. Pareto efficiency
____________________________________________
66. Price elasticity of demand
____________________________________________
67. Income elasticity of demand
____________________________________________
68. Engel’s law
____________________________________________
69. Marginal utility
____________________________________________
70. Marginal revenue productivity theory of wages
____________________________________________
71. Welfare economics
____________________________________________
72. Perfect competition
____________________________________________
73. Consumer surplus
____________________________________________
74. Pigovian tax
____________________________________________
75. Fisher equation
____________________________________________
76. Complementary goods
____________________________________________
77. Backward sloping supply curve
____________________________________________
78. Externalities
____________________________________________
79. Pigovian Effect
____________________________________________
80. Labor elasticity of demand
____________________________________________
EXERCISE 7
Timeline Activity. Choose from the following matrix the
appropriate year that matches the timeline event relating to the
history of the neoclassical school economic thought. Write the
year in the provided box after the item.
Timeline of Neoclassical Economic Thought
1300 1691 1817 1844
1851 1861 1871 1874
1895 1904 1906 1921
1934 1936 1944 1947
1948 1953 1954 2007
81. Islamic scholar Ibn Taymiyyah publishes a study of the
effects of supply and demand on prices.
82. English philosopher John Locke argues that commodity
prices are directly influenced by the ratio of buyers to
sellers.
83. British economist David Ricardo argues that prices are
influenced mainly by the cost of production.
84. Jules Dupuit, a French engineer, originates the idea of
consumer surplus—a measurement of welfare that can
be used to assess the impact of competition.
85. Irish political economist Francis Edgeworth publishes a
mathematical assessment of economics in
Mathematical Psychics.
86. Ernst Engel argues that as people grow richer, they
increase spending on food by less than their increase in
income.
87. British economist William Jevon describes the marginal
utility theory of value, which sees value as coming from
a product’s value to its buy.
88. French economist Léon Walras uses equations to
determine the overall equilibrium of an economy.
89. British economist Alfred Marshall demonstrates how
supply and demand create the price of goods in his
Principles of Economics.
90. Robert Giffen introduces the concept of Giffen goods, for
which consumption rises with price.
91. Vilfredo Pareto develops a new theory of equilibrium that
takes account of the compatibility of individual incentives
and constraints.
92. US economist Frank Knight publishes Risk, Uncertainty,
and Profit, which analyzed the effects of uncertainty on
Marshall’s model of perfect competition.
93. British economist John Hicks uses the concept of
elasticity to measure how easily products can be
substituted for each other.
25

94. British economist John Maynard Keynes identifies
economy-wide total demand and supply.
95. US economists John von Neumann and Oskar
Morgenstern extend utility theory to situations with
uncertain outcomes.
96. US economist George Stigler dismisses Marshall’s
examples of Giffen goods in Notes on the History of the
Giffen Paradox.
97. Friedrich Hayek’s Individualism and Economic Order
attacks Marshall’s view of perfect competition.
98. In The Behavior of Rational Man at Risk, Maurice Allais
demonstrates how people behave differently from the
way utility theory predicts.
99. US economist Kenneth Arrow and French economist
Gérard Debreu use mathematics to show a connection
between free markets and Pareto optimality.
100.Robert Jensen and Nolan Miller revive the argument in
Giffen Behavior: Theory and Evidence, which reports the
existence of a Giffen good in poor, urban areas of China.
EXERCISE 8
Essay. Briefly explain the thought of the following economic
insights from the neoclassical economists. Write your answer on
the blanks provided for after the question.
101. In every case the more of a thing is offered for sale in a
market, the lower is the price at which it will find purchasers. (Alfred
Marshall)
___________________________________________________
___________________________________________________
___________________________________________________
___________________________________________________
102. A perfect market is a district… in which there are many buyers
and many sellers all so keenly on the alert and so well acquainted
with one another’s affairs that the price of a commodity is always
practically the same for the whole of the district.(Alfred Marshall)
___________________________________________________
___________________________________________________
___________________________________________________
___________________________________________________
103. The labor and capital of the country acting on its natural
resources, produces annually a certain net aggregate of
commodities-material and immaterial, including services of all
kinds. (Alfred Marshall)
___________________________________________________
___________________________________________________
___________________________________________________
___________________________________________________
104. Economics is a “calculus of pleasure and pain.” (William
Stanley Jevons)
__________________________________________________
___________________________________________________
___________________________________________________
___________________________________________________
105. Given, a certain population, with various needs and powers
of production, in possession of certain lands and other sources
of material: required, the mode of employing their labor which
will maximize the utility of their produce. (William Utility Jevons)
___________________________________________________
___________________________________________________
___________________________________________________
___________________________________________________
106. The origin of all economic value is the relation between a
human want and the available economic goods capable of
satisfying the want. (Carl Menger)
___________________________________________________
___________________________________________________
___________________________________________________
___________________________________________________
107. In the demand equations, the quantity demanded of a
product is related not only to the price of the product but also to
the price of all other products and of the productive services.
(Leon Walras)
___________________________________________________
___________________________________________________
___________________________________________________
___________________________________________________
108. Any change that makes at least one individual better off and
no one worse off is an improvement in social welfare. (Vilfredo
Pareto)
___________________________________________________
___________________________________________________
___________________________________________________
___________________________________________________
109. Welfare gains came from improving the quality of the work
force through changes in the distribution of income or by
improved working conditions. (Arthur Cecil Pigou)
___________________________________________________
___________________________________________________
___________________________________________________
___________________________________________________
110. Economics is a study of economic welfare which is that part
of social welfare that can be brought directly or indirectly into
relation with the measuring rod of money. (Arthur Cecil Pigou)
___________________________________________________
___________________________________________________
___________________________________________________
___________________________________________________
26

EXERCISE 9
Essay. Explain or discuss what is asked in the following.
111. Explain the difference between classical economics and
neoclassical economics theories
________________________________________________
________________________________________________
________________________________________________
________________________________________________
________________________________________________
________________________________________________
________________________________________________
________________________________________________
________________________________________________
112. Enumerate and explain several assumptions common to
school of Neoclassical economics.
________________________________________________
________________________________________________
________________________________________________
________________________________________________
________________________________________________
________________________________________________
________________________________________________
________________________________________________
________________________________________________
113. Explain the proposition that economic actors made decisions
based on margins.
________________________________________________
________________________________________________
________________________________________________
________________________________________________
________________________________________________
________________________________________________
________________________________________________
________________________________________________
________________________________________________
114. Contrast and compare the scope and method of economics
according to Jevons, Menger, and Walras.
________________________________________________
________________________________________________
________________________________________________
________________________________________________
________________________________________________
________________________________________________
________________________________________________
________________________________________________
________________________________________________
115. Explain the cause and effect relationship between goods and
wants by Carl Menger.
________________________________________________
________________________________________________
________________________________________________
________________________________________________
________________________________________________
________________________________________________
________________________________________________
________________________________________________
________________________________________________
116. Explain why classical value theory explains what
determines prices in the long run, whereas marginal utility theory
explains prices in the short run.
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
117. Discuss Marxian theory of disintegration of capitalism by
contemplating the inherent conflicts and contradictions.
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
118. Discuss the concept of Pareto efficiency introduced by
Vilfedo Pareto which is an important criterion for evaluating
economic systems and public policies.
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
119. Cite important changes or further developments about
neoclassical economics made by other economists.
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
120. Discuss the criticisms of neoclassical economics made by
other economists.
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
27

EXERCISE 1
is incorrect.
1. Institutional economics is concerned with the institutions
that constrain the use and exchange of resources and
their consequences for economic performance. _______
2. Institutional economics does not make an analysis of the
economic behavior of individuals. _______
3. For institutional economists, the proper subject-matter of
economic theory is institutions.
4. Institutional economists based their economic ideas
mostly on neoclassical school of economic thought.
_______
5. Institutional school of economic thought took birth in
Europe. _______
6. Rational behavior means that individuals maximizes their
utility function under the constraints they face in pursuit
of their self-interest. _______
7. Thorstein Veblen is the first to note that economic
behavior is driven by psychological factors, such as fear
and status-seeking, as much as by rational self-interest.
_______
8. Alfred Marshall analyzes the motivation in capitalism to
conspicuously consume their riches as a way of
demonstrating success. _______
9. The institutions studied by institutional economists is
defined as "collective action in control, liberation and
expansion of individual action". _______
10. In the concept of conspicuous consumption, people
consume to be noticed. _______
11. Luxurious goods such as Porsche cars and Rolex
watches are examples of Giffen goods. _______
12. The work of Adolf Berle stands as a founding pillar of
thought in modern corporate governance. _______
13. According to John Commons, economics is based on
collective action in the form of transactions that involve
the exchange of resources. _______
14. “Economics and the Public Purpose” is written by Wesley
Mitchell. _______
15. Herbert Alexander Simon is known for his research on
industrial organization. _______
EXERCISE 2
Identification. Identify each statement below by referring to the
following box which terms pertaining to institutional economics.
Write the answer on the space provided for before the number.
16. ____________________ is primarily concerned with the
role of human-made institutions in shaping economic
behavior.
17. ____________________ is spending on goods and
services acquired mainly for the purpose of displaying in
wealth or maintaining social status.
18. ____________________ uses social and cognitive
factors in understanding the economic decisions or
rationality of economic agents performing economic
functions.
19. ____________________ refers to the arrangement or
mechanism of social order governing the behavior of a
group of individuals within a given human community.
20. ____________________ is a category of good
particularly luxury items for which people's preference
for buying them rises as the price increases.
21. ____________________ pertains to the collaboration of
two or more individuals in pursuit of a common goal.
22. ____________________ is a social and economic order
based on fostering a desire to purchase goods and
services in ever greater amounts.
Lingayen Campus
WORKTEXT 7 : INSTITUTIONAL ECONOMICS
NAME: _______________________________________ SCORE: ___________________________________
28

23. ____________________ is an American institutional
economist who argues that the economy is a web of
relationships between people with diverging interests.
24. ____________________ is the magnum opus of
Thorstein Veblen and is considered one of the first
detailed critiques of consumerism.
25. ____________________ is an American economist
known for his empirical work on business cycles.
26. ____________________ is an American economist
credited for his theory of conspicuous consumption.
27. ____________________ is regarded as the principal
thinker of Texas school of institutional economics who
developed the ideas of dichotomy of "technology" and
"institutions" that separates the inventive from the
inherited aspects of economic structures.
28. ____________________ is a term introduced by the
Thorstein Veblen which denotes visible leisure for the
sake of displaying social status.
29. ____________________ is a Canadian-American
economist who argues the influence of the market power
of large corporations.
30. ____________________ is an economics book by
Thorstein Veblen that talks about the growing corporate
domination of culture and the economy.
EXERCISE 3
Put a check mark (/) if the following economic ideas pertains to
institutional economics, otherwise, put an (X) mark. Write the
answer on the space provided for.
31. It is believed that the group social behavior is more
important in analyzing economic problems than the
individual behavior. ________
32. The evolutionary approach in economic analysis is
advocated. ________
33. Study of the evolution and functioning of economic
institutions is the central theme in economics. ________
34. The idea of formal equilibrium is rejected. ________
35. Inductive method is advocated rather than deductive
method. ________
36. The notion of individual agents as utility-maximizing is
regarded as inadequate or erroneous. ________
37. Markets are viewed as a result of the complex interaction
of these various institutions. ________
38. Aggregate macroeconomic outcomes are the primary
concerns in economics. ________
39. The growth in the wealth of nations and advocating
policies to promote such growth is analyzed. ________
40. People have rational preferences among outcomes that
can be identified and associated with a value. ________
EXERCISE 4
Identification. Identify the magnum opus of each of the following
classical economists. Write the answer in the blank provided after
the number.
41. Thorstein Veblen ______________________________
42. John R. Commons _____________________________
43. Wesley Clair Mitchell ___________________________
44. Adolf Berle ___________________________________
45. Herbert Alexander Simon _______________________
46. John Kenneth Galbraith ________________________
47. Robert H. Frank ______________________________
48. Warren Samuels ______________________________
49. Geoffrey Hodgson _____________________________
50. Elinor Ostrom ________________________________
EXERCISE 5
the number
51. Thorstein Veblen
52. John R. Commons
53. Wesley Clair
Mitchell
54. Adolf Berle
55. Herbert Alexander
Simon
56. John Kenneth
Galbraith
57. Robert H. Frank
58. Warren Samuels
59. Geoffrey Hodgson
60. Elinor Ostrom
A B
C D
E F
G H
I J
29

History of Economic Thought

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