Question

Explain what Adam Smith meant by the invisible hand of the marketplace

Answer 1

In the most famous work by classical economist Adam Smith, "The Wealth of Nations", he introduces the concept of "the invisible hand".

He speaks in these terms to establish the self-regulating nature of the market. According to his theory, there's an unseen mechanism by which balance between supply, demand and other factors are maintained within a free market when everything's working properly. Adam Smith proposed this was a natural result of all participants competing to maximize their profit, benefiting society in its entirety. He uses the metaphor of an invisible hand because this balance is maintained by natural course, as a process that cannot really be seen or explained and is even involuntary.

Hope this helps!

Answer 2

Adam Smith's invisible hand of the marketplace meant laissez-faire economic philosophy,which argues that government intervention in the marketplace is unnecessary.Instead,changes in demand for resources automatically result in price adjustments without the need for regulation.