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Economics (self interest, product diversity, and firms)

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How does self-interest help achieve society's economic goals? Why is there such a wide variety of desired goods and services in a market? In what ways are entrepreneurs and businesses at the helm of the economy but commanded by consumers?

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Solution Summary

The following is an explanation of the roles that self interest, product diversity, and entrepreneurs play in the economy. How self-interest helps to achieve society's economic goals.

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How does self-interest help achieve society's economic goals?

This idea dates back to Adam Smith and perhaps the Physiocrats in France who influenced Smith's work. Smith stated something close to the phrase "It is not from the benevolence of the brewer, the butcher, or the baker that we receive our dinner but from regard to their own self interest". For Smith however it was important also for competition to exist. In other words no state backed monopolies. In Smith's view when firms were forced to compete with one another (look out for their own self interest) they would have an incentive to reduce ...

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