What is the economic variable that guides the invisible hand?
What will be an ideal response?
The invisible hand is guided by the market price. Market prices act as the most important piece of information, leading the right buyers to buy and the right sellers to sell; no more, no less. It ensures that self-interest and social interest are perfectly aligned. It also allows economic agents to make optimal decisions.
You might also like to view...
Successful entrepreneurs
What will be an ideal response?
Suppose the economy's production function is Y = A(300N - N2). The marginal product of labor is MPN = A(300 - 2N). Suppose that A = 10. The supply of labor is NS = 0.05w + 0.005G.(a)If G is 26,000, what are the real wage, employment, and output?(b)If G rises to 26,400, what are the real wage, employment, and output?(c)If G falls to 25,600, what are the real wage, employment, and output?(d)In cases (b) and (c), what is the government purchases multiplier; that is, what is the change in output divided by the change in government purchases?
What will be an ideal response?