ECONOMICS
PRODUCTIVITY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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To maximize profits, firms in market economies strive to efficiently supply and distribute what consumers want.
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Firms would be forced to meet the consumers’ needs cheaply by a democratic government.
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Command economies guarantee profits to firms.
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Market economies always have extra resources so there is always enough.
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Detailed explanation-1: -Adam Smith was the ‘forefather’ of capitalist thinking. His assumption was that humans were self serving by nature but that as long as every individual were to seek the fulfillment of her/his own self interest, the material needs of the whole society would be met.
Detailed explanation-2: -Adam Smith described free markets as “an obvious and simple system of natural liberty.” He did not favor the landowner, the factory owner, or the worker, but rather all of society. He saw, however, self-defeating forces at work, preventing the full operation of the free market and undermining the wealth of all nations.
Detailed explanation-3: -Adam Smith’s theory is based on the principle of ‘Laissez-Faire’ which requires that state should not impose any restriction on freedom of an individual. The theory of economic development rests on the pillars of saving, division of labour and wide extent of market.