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The Invisible Hand - Adjustment of Supply and Demand

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Given that the invisible hand supposedly adjusts market supply and demand, how does it relate to the scarcity of resources? How does the invisible hand increase/decrease the scarcity of resources? Does theory and reality in economics actually differ? If so, why?

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Solution Summary

The answer to this problem explains how individual efforts to maximize their own personal gain in a free market benefits the society.. The references related to the answer are also included.

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The invisible hand means that individual efforts to maximize their own personal gain in a free market benefits the society. The individuals have no intention to benefit the society. They want to benefit only themselves. You have given the example of market demand and supply. In the market place, there are buyers and sellers and each is striving to maximize his own personal gain and in the process there is an interaction of market demand and supply and equilibrium is reached. The intention of buyers ...

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  • BSc , University of Calcutta
  • MBA, Eastern Institute for Integrated Learning in Management
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