1. Adam Smith’s Market Economy

2. Adam Smith was an economist from Scotland
Adam Smith was an economist from Scotland. He published his book, The Wealth of Nations, in He described capital as being money available for investment. Smith said that capital can produce wealth. Smith pointed out that money that lies under a mattress does not make money. It is just being stored. On the other hand, money that is invested, or lent, produces wealth.

3. He also thought the government should set as few limits as possible on business, trade, and manufacturing. Today, Smith’s ideas go by the name of capitalism. This economic system has two main features:
Most businesses are privately owned and operated.
Competition and the free market most often determine what will be produced and at what price it will sell.

4. Capitalism also includes the following ideas:
People are free to decide how they will earn and spend their income;
Companies may choose which goods and services to produce and how much to charge for them;
Companies also compete with one another to sell their products.

5. Individuals influence the economy
Individuals influence the economy. As workers, individuals may decide which jobs to prepare for and where to try to find a job. As investors, they decide how much of their income to save and how to invest their savings. Private investors provide much of the money that businesses need to grow.

6. Businesses decide what to produce and where to conduct their activities. Business plays a large role in determining how fast a capitalist economy grows. An economy grows when it increases its production of goods and services. Growth requires investment in buildings, equipment, and other resources to increase production. In a capitalist nation, businesses decide for themselves when and how to invest for this purpose.

7. The market is a term used for places and situations in which people buy and sell goods and services. The prices of goods and services are determined by such conditions as “supply and demand” and competition. Generally, the market forces prices to fall when supply exceeds demand and to rise when demand exceeds supply.

8. The government in a capitalist nation allows individuals to use their property largely as they wish, and to work where they please. The government generally permits companies to set wages for their workers and prices for their products.

9. In conclusion, capitalism allows much personal freedom and provides a high standard of living for many people.

10. Other information about Adam Smith:
He is generally regarded as the founder of modern economics;
He felt that in order to make money, people produce things that other people are willing to buy. Buyers spend money for those things they need or want most;
He said that business profits would be used to make even more profits. Businesses would get larger and this would create more jobs, and a larger national income;

11. He believed that free trade and an economy that could control itself would result in progress for everybody. He didn’t believe that the government should control the economy;
He argued for a “hands off” government policy towards business.