The Market as a Social Institution — Sociology STD 12 Humanities — Question
CBSE BoardEnglish MediumSTD 12 HumanitiesSociologyThe Market as a Social Institution4 Marks
Question
According to Adam Smith, how do markets work in the modem capitalist economy?
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Answer
Market in the Modern Capitalist Economy:
According to Adam Smith the market economy is made up of a series of individual exchanges or transactions, which automatically create a functioning and ordered system.
He argued that the capitalist economy is driven by individual self-interest, and works best when individual buyers and sellers make rational decisions.
He used the idea of “invisible hand” to argue that society overall benefits when individuals pursue their own self interest in the market.
He supported the idea of a “free market” (Iaissez-faire), that is a market free of all kinds of regulations.
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