Question

Adam Smith’s “invisible hand” is based on the premise that:

A) Everyone’s pursuit of their self-interest will create the most efficient allocation of economic resources both in production and for consumption

B) Producers try to obtain a competitive advantage and maximum profits

C) Consumers try to obtain the lowest price for value received

D) All of the Above

Answer 1

The right answer is option A, that is, everyone's pursuit of their self-interest will create the most efficient allocation of economic resources both in production and for consumption. Invisible hand concept was introduced by Adam Smith in his book "the wealth of nations", and according to Adam Smith individual's self-interest will lead to the most efficient market outcome and there is no need of the government intervention as markets of self correcting.