Institution
Topic: Scarcity, Choice and Economic Systems · NCERT: Class 12, Ch 1 "Introduction (Microeconomics)"
Meaning
In economics, an institution is an organisation that serves some purpose. It does not have to be a building or an office. It can be a set of rules and arrangements that shape how people deal with each other. NCERT calls the market an institution because it organises the free interaction of people who are buying, selling and producing.
Example
A weekly village haat is an institution. It is a regular arrangement where farmers, weavers and buyers meet to exchange goods. The same buying and selling done through a phone call or a website is also the institution of the market, even though no physical place is involved.
Don't confuse with
- Physical place or building: An institution is defined by its purpose and its arrangements, not by a location. A market building is only one form the institution can take.