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Unformatted text preview: h he was able to observe the natural
function of price in the market place without
intervention. His reference to the process as an
“invisible hand” suggests he perceived it to be a semimagical process in that all decisions regarding
production, distribution and purchases for consumption
occurred automatically and efficiently.
Adam Smith was incapable of understanding exactly
how the process worked, but he did recognize how
unique it was. Interestingly enough, he was observing
and being impressed by the very functions you and I
take very much for granted today. 12 Chapter 2: The Market System and The Circular Flow
30 In summary, we review all the major automatic
functions. Market systems are efficient in terms of
production and consumption and this is accomplished
due to natural incentives inherent in the process. Virtues of the Market System
Efficiency - The system promotes the efficient
use of resources. All decisions are enabled through freedom of choice in
the market system. When we consider the synergistic
effect of these fac...
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This note was uploaded on 09/10/2009 for the course ECO 2251 taught by Professor Kirkland during the Spring '09 term at Troy.
- Spring '09