Chapter 4: The Market as a Social Institution – NCERT Solutions

Q1 What is meant by the phrase ‘invisible hand’?

The phrase ‘invisible hand’ was coined by the economist Adam Smith. It refers to the unseen force that moves the free market economy.

Self-Interest: Smith argued that individuals acting in their own self-interest (to make profit) unintentionally benefit society as a whole.
Market Balance: This self-interest drives supply and demand, which naturally regulates prices and ensures that goods and services are distributed efficiently without the need for government intervention.

Q2 How does a sociological perspective on markets differ from an economic one?

Economic Perspective: Views the market as a mechanism of price determination and exchange. It focuses on supply, demand, and efficiency, treating individuals as rational decision-makers.
Sociological Perspective: Views the market as a social institution. It argues that markets are not just about money but are “embedded” in social structures. It studies how culture, caste, power relations, and social norms influence economic behavior.

Q3 In what ways is a market – such as a weekly village market – a social institution?

A weekly village market (like a haat) is more than just a place to buy vegetables:

Social Interaction: It serves as a meeting place where villagers meet relatives, arrange marriages, and exchange gossip.
Hierarchy Display: The layout of the market often reflects the social hierarchy (e.g., upper castes or wealthy merchants having prime spots).
Cultural Exchange: It is a hub for cultural activities, festivals, and the spread of local news, reinforcing social ties within the region.

Q4 How do caste and kin networks contribute to the success of a business?

In India, pre-colonial and colonial trading communities often used caste and kinship (family ties) to build trust, which is essential for business.

                Example: The Nattukottai Chettiars

                This banking community used their strong caste network to transfer money securely. They operated within their own caste circle, which ensured that if someone defaulted or committed fraud, they would face social boycott. This “social collateral” lowered the risk of doing business.

Similarly, the Marwaris used kinship networks to establish trade across the country, providing housing and credit to fellow community members.

Q5 In what ways did the Indian economy change after the coming of colonialism?

Colonialism integrated India into the global capitalist system, but in a subordinate position:

De-industrialization: Traditional industries (like textiles) were destroyed to make way for British manufactured goods.
Source of Raw Materials: India was transformed into a supplier of raw materials (cotton, jute, indigo) for British factories.
Monetization: The British introduced a uniform currency and collected taxes in cash, forcing subsistence farmers to sell crops in the market, thus commercializing agriculture.

Q6 Explain the meaning of ‘commoditisation’ with the help of examples.

Commoditisation occurs when things that were not previously traded in the market become commodities to be bought and sold for money.

                Examples:
                Labor: In the past, people worked for kin or feudal lords. Now, labor is sold for a wage.
Water: Once a free natural resource, bottled water is now a major commodity.
Human Organs: The illegal trade of kidneys or surrogacy services turns the human body into a commodity.
Traditional Knowledge: Yoga or Ayurveda becoming paid services.

            

Q7 What is a ‘status symbol’?

A status symbol is a visible marker of social standing. It is a good or service purchased not just for its utility, but to display wealth and prestige to others. This is related to Max Weber’s concept of “status groups” and Veblen’s “conspicuous consumption.”

Examples: Luxury cars, branded designer clothes, or the latest expensive smartphone.

Q8 What are some of the processes included under the label ‘globalisation’?

Globalisation is a complex process involving the increasing interconnection of the world:

Economic Integration: Removal of trade barriers, allowing free flow of capital, goods, and services across borders.
Global Division of Labor: Manufacturing moves to countries with cheap labor (like factories in China or BPOs in India).
Cultural Exchange: The spread of media, food (McDonald’s), and lifestyle across nations.
Technological Connectivity: The internet and communication technologies linking markets instantly.

Q9 What is meant by ‘liberalisation’?

Liberalisation refers to the relaxation of government restrictions and controls on the economy. In India, this process started in 1991.

Deregulation: Reducing the role of the state in business (ending the “License Raj”).
Privatisation: Selling government-owned companies to private owners.
Open Markets: Reducing tariffs and allowing foreign investment (FDI) into the country.

Q10 In your opinion, will the long term benefits of liberalisation exceed its costs? Give reasons.

This is a debatable issue, but a balanced view suggests a mix of both:

                Arguments for Benefits (Pros):
                Higher economic growth and modernization of technology.
Access to better and cheaper goods for consumers.
Creation of new jobs in service sectors (IT, BPO).

            

                Arguments for Costs (Cons):
                Rising inequality between the rich and poor.
Job losses in the unorganized sector and small industries that cannot compete with global giants.
Vulnerability of farmers to global price fluctuations (agrarian crisis).

            

Conclusion: While liberalisation has boosted overall wealth, its long-term success depends on whether the government can provide social safety nets to protect the vulnerable sections from its adverse effects.