Economic Decision
Essay Preview: Economic Decision
Report this essay
Marcroeconomics
“The Invisible Hand”
Analysis:
The invisible hand is the tendency of firms and resource suppliers to seek and further their own self-interests in competitive markets and to also promote the interests of society as a whole. This theory guides competitive firms to promote self-interests as well as public interest. When it comes to producing and selling a product the owners or the people that run the business want to do it in the most efficient way possible. If the business itself is producing a product that society wants in an efficient way and in a mannerly fashion it is only in the publics best interest for them to buy that product. One thing that any person wants when running a business is maximum output at the least cost and this goes along with the invisible hand method. If a business is running in the least costly way and in the most efficient way it maximizes or enhances societys output and income. This is how the invisible hand method tends to work in accordance to businesses as well as society all together.
Example:
If two businesses are producing and selling watermelons and they are competitive, then whoever sells their watermelons at the lowest cost will most likely gain more customers as opposed to the one who sells it at a higher price. However, the key to the invisible hand method is efficiency. If someone is producing a product at a cheap cost and its not that good anyways, then that person more than likely wont sell it. This is how the invisible hand method works and how it pertains to society as well as businesses.