A.In his work The Wealth of Nations, Adam Smith talks about how factories produce pins in order to demonstrat

Question

e some of his economic principles. How would you classify this example in terms of the method of economic analysis: microeconomics or macroeconomics; what type of question in it discussing.

Answer 1

It could go either way, depending on what context you take it in. The pin factory example is talking about division of labor. Thus, in essence, it is a microeconomic question, dealing with how firms can maximize their productivity by dividing labor among different individuals.

However, one could interpret this on more a macroeconomic scale as well. This has been used to talk about the idea of comparative advantage (although Ricardo originally came up with this terminology), which could be a macro concept. Applying this division of labor to different companies could make it macro.

However, I would classify it as a micro concept since Smith did not directly apply it to the entire economy in this example. Instead, he talked about a firm, which is by definition micro.