Question

According to Adam Smith’s Invisible Hand Theory involving specialization and division of labor, People specialize where opportunity costs are at a maximum. People specialize where their opportunity costs are lowest. People do not specialize. People specialize in the activity that pays the highest wage. People specialize in the activity that they enjoy the most, no matter what the salary is.

Answer 1

Ans) Adam Smith's theory of invisible hands states that the people or market situation pull themselves to get more for eg: every producer wants to get maximum profit by selling as more as more possible by which he will get amount which he further invest in market or in his business, the demand and supply of the market push them to produce more, as a result no forces are seen in real world who is pulling or pushing to whom but the process is going on, the income of person is increasing, firms are getting more profit decades after decades, the economy is growing all this is named as invisible hands as the factors behind economy growth is not shown. And according to this theory people will specialize in the area where opportunity cost is maximum,as he will see what he can achieve after giving up particular amount in the area if he is getting less then that amount then he will not change his production or any other activity. The human nature is getting more from possible resource. For eg: if a student has completed his studies but not preferring to do job as he want to study further so he will see the opportunity cost of studies to do job if opportunity cost is high only then he will study and if after studies he will get less then the present offer for job then surely he will do job. All the things happening in people's life ,every person wants get maximum after comparing from previous one, the opportunity cost.