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Definition

  • The “Invisible Hand” is a term first introduced to modern literature by the british economist Adam Smith. 
  • It refers to the human condition of greed, a powerful force that aids the market demand and supply forces to reach an equilibrium in the free market. 🤑

Explanation

  • The “Invisible Hand in essence refers to the motivating factor of self-interest in the free market. Both suppliers and consumers of a good are motivated by self-interest to maximize consumer and producer surplus. 💰
  • As a result of this force, markets for goods are able to reach a state of equilibrium wherein the quantity of goods demanded is equal to the quantity of goods supplied. 😁

Conclusion

  • It is the “Invisible Hand” that allows both consumers and producers to maximize their total utility during negotiations over the price and quantity of goods bought and sold. 
  • Thus, the “Invisible Hand” is a defining factor in maintaining and promoting capitalism as an economic system. 

“What Is the 'Invisible Hand'?” Market Business News, marketbusinessnews.com/financial-glossary/invisible-hand-definition-meaning/.

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