The correct option is 2 only.
Explanation
In economics, a "market" refers to the aggregate of arrangements that allow buyers and sellers to interact and exchange goods or services. It is defined by the mechanism of exchange rather than a specific location or government control.
- Statement 1 is Incorrect: An institution where the government mandates all economic activities describes a Centrally Planned or Command Economy, not a market. In a market system, economic activities are driven by the voluntary interaction of private individuals and firms, not by government mandates.
- Statement 2 is Correct: A defining characteristic of a market system is the absence of a central coordinating authority for production and consumption decisions. Instead, coordination is achieved through the price mechanism. Prices act as signals that convey information about scarcity, demand, and supply, guiding the allocation of resources.
- Statement 3 is Incorrect: In economic theory, the term 'market' is not restricted to a physical location (like a village chowk or shopping mall). It encompasses any arrangement-physical, digital, or telephonic-that facilitates the exchange of goods and services between buyers and sellers.
Key Takeaway:
A market in economics is a mechanism for exchange coordinated by prices, not necessarily a physical place. It is distinct from a command economy, where a central authority dictates economic activities.