Final answer:
According to Smith, the law of supply and demand regulates capitalism by determining the prices of goods and services in the market.
Step-by-step explanation:
According to Smith, the law of supply and demand regulates capitalism by determining the prices of goods and services in the market. The law states that as the supply of a product increases, while the demand for it remains constant, the price will decrease. Conversely, if the demand for a product increases, while the supply remains constant, the price will increase. This dynamic forces producers to supply more when the demand is high, and vice versa, creating a balance in the market.
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