In Adam Smith's competitive market economy, the question of what goods to produce is determined by:
A) the "invisible hand" of the price system.
B) businesses.
C) unions.
D) the government, through laws and regulations.

Question

Quizplus · Accepted Answer

In Adam Smith's competitive market economy, the question of what goods to produce is determined by the "invisible hand" of the price system. This means that the market forces of supply and demand dictate what goods and services are needed and therefore produced. Businesses respond to the signals sent by the market and adjust their production accordingly. Unions may have an influence on labor markets, but ultimately the market still determines what goods are produced. The government may regulate the market, but in a true free market economy, their role in determining what goods are produced would be limited.

In Adam Smith's Competitive Market Economy, the Question of What