Final answer:
The phrase "invisible hand" refers to the self-regulating nature of the market where individual self-interest inadvertently leads to societal benefits. Market prices guide consumers and producers in their decisions, driving the efficient allocation of resources.
Step-by-step explanation:
The term "invisible hand" was coined by economist Adam Smith to describe the self-regulating nature of the marketplace. This phrase illustrates how individual pursuit of self-interest can lead to positive societal outcomes. Specifically, individuals looking to maximize their own gains in a free market can inadvertently contribute to social good through their actions. The trend towards equilibrium from these unseen market forces occurs without deliberate intervention by society or government.
Market prices reflect this phenomenon by providing signals to consumers and producers. For consumers, prices convey information about the value and scarcity of goods, guiding their purchasing decisions. For producers, these prices suggest which products are in demand, informing their production choices. As a result, the invisible hand guides resources to their most efficient use, balancing supply and demand, facilitating trade and maximizing overall wealth.