Question

Free Markets are a way of connecting people who may mutually benefit by exchanging goods and services through a process of buying and selling.

b) Identify an economist(Adam Smith) who agrees that in general free markets are a desirable way of organizing economic and social activity. Identify another economic concept(Invisible hand) that this Economist supports. Discuss how this economic concept can help you improve your life or society.

Your answer needs to provide at least three paragraphs.
The first paragraph provides information about the economist.
The second paragraph identifies the economic concept that you have chosen.
The third paragraph discusses how you are going to apply this concept.

Answer all the questions in well developed paragraphs. The paragraphs should be at least five or six sentences long, and they should clearly include a topic sentence.

Answer 1

Adam smith is termed as 'father of economics' who was a British economist , Smith was considered as classical economist by Karl Marx.Adam smith believed in the free operation of market.the economist has given his concept on the basis of long term market structure and economy would attain equilibrium after the short term fluctuation and would always be in equilibrium.Smith believed that full employment is a general feature of any economy.Adam Smith believed that people work on the basis of self interest which enhances their skills and ability and this is known as specialization.

the concept of free market where the prices are set by the demand and supply of goods and services are termed as invisible hand.in the concept of invisible hand when there is any disequilibrium in the economy concerned with the demand and supply then it is automatically corrected by the forces of demand and supply,furthermore there is no intervention of government and market is set free to operate.

we can interpret the concept in an example-suppose in a labor market,which is in equilibrium,a large number of workers coming in this market due to its wage rate.now the supply would be greater than demand and the wage rate would decline and many labors would get discouraged about this and leave the place and then there would be decline of labor supply and ultimately the demand would be equal to supply of labors and the economy would be in equilibrium.as we can see without government intervention the economy is attaining equilibrium with the help of demand and supply concept.this is known as the concept of invisible hand.