A set of arrangements where economic agents can freely exchange their endowments or products with each other is known as:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Market
We usually picture a market as a place full of shops, but in economics the word is wider. People own endowments or make products, and they gain by exchanging them. Any set of arrangements that lets economic agents freely exchange these with each other is a market, even when buyers and sellers deal by telephone or over the internet and never meet at one spot.
Why the other options are incorrect
Option (1) Embassies — Incorrect. An embassy is the office of one country’s diplomats in another country. It is a political institution, not an arrangement for exchanging goods.
Option (2) Fixed exchange market — Incorrect. There is no such term.
Option (4) Defense colony — Incorrect. This is the name of a residential locality. It has nothing to do with exchange between economic agents.
Note: A same/similar question was asked in CUET (UG) in the papers below.
| 2026 | 2025 | 2024 | 2023 | 2022 |
| 21-05 S2 | 03-06 S2* | 16-05 S1* | – | – |
* A similar question.
NCERT (2025-26): “1.3.2 The Market Economy … In contrast to a centrally planned economy, in a market economy, all economic activities are organised through the market. A market, as studied in economics, is an institution6 which organises the free interaction of individuals pursuing their respective economic activities. In other words, a market is a set of arrangements where economic agents can freely exchange their endowments or products with each other. It is important to note that the term ‘market’ as used in economics is quite different from the common sense understanding of a market. In particular, it has nothing as such to do with the marketplace as you might tend to think of.…” |