What does the concept of "invisible hand" imply?
What will be an ideal response?
The "invisible hand" is an idea in economics that suggests that when all assumptions of a perfectly competitive market are in place, the pursuit of individual self-interest promotes the well-being of society as a whole, almost as if the individual is led by an invisible hand to do so. Thus, under perfect competition, when individuals are working to maximize personal profits, they end up promoting social interests.
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In 1975, Congress passed a tax rebate to spur consumer spending. Consumers:
a. spent the entire amount of the tax savings, boosting the economy, as planned b. did not spend any of the amount of the tax savings c. saved a substantial share of the tax savings and spent the rest d. saved a small portion of the tax savings, and spent the rest
Suppose a consumer has an income of $800 per month and that she spends her entire income each month on beer and bratwurst. The price of a pint of beer is $5, and the price of a bratwurst is $4 . Which of the following combinations of beers and bratwursts represents a point that would lie to the exterior of the consumer's budget constraint?
a. 160 beers and 200 bratwursts b. 40 beers and 50 bratwursts c. 80 beers and 100 bratwursts d. 160 beers and 0 bratwursts