Final answer:
This high school-level social studies question asks about key economic concepts, including incentives, voluntary exchange, self-interest, scarcity, the invisible hand, and free market principles. The invisible hand, a term coined by Adam Smith, describes how self-interested behavior can lead to beneficial economic outcomes.
Step-by-step explanation:
Individuals are influenced by incentives that motivate them and encourage them to do things. Voluntary exchange is when buyers and sellers willingly engage in a mutually beneficial transaction. Economists assume that everyone acts in their self-interest by analyzing the benefits and costs of their decisions. The idea that we all have unlimited wants but limited resources is called scarcity. The concept that unintended social benefits arise from individuals acting in their self-interest is known as the invisible hand. Buyers and sellers are meeting to exchange goods and services with no government intervention in a free market.
Adam Smith, writing in The Wealth of Nations, explained that self-interested behavior can lead to positive social results. For example, when people work hard to make a living, they create economic output and consumers looking for the best deals will encourage businesses to offer goods and services that meet their needs. By each individual maximizing their utility, the overall economy benefits from the efficient allocation of resources.