ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Definition: The unobservable market force that helps the demand and supply of goods in a free market to reach equilibrium automatically is the invisible hand. Description: The phrase invisible hand was introduced by Adam Smith in his book ‘The Wealth of Nations’.

Detailed explanation-2: -The term “invisible hand” first appeared in Adam Smith’s famous work, The Wealth of Nations, to describe how free markets can incentivize individuals, acting in their own self-interest, to produce what is societally necessary.

Detailed explanation-3: -What is an example of the invisible hand? To increase market share, a manufacturer might provide a higher-quality product at a lower price than its competitors. Maintaining low pricing may generate demand and foster competition among companies selling comparable items.

Detailed explanation-4: -Answer and Explanation: d. Market power is the instrument with which the invisible hand directs economic activity.

Detailed explanation-5: -Examples of the invisible hand concept In the automotive industry, the number of people buying vehicles fluctuates based on the economy’s health. In a healthy economy, the more people looking to buy vehicles means manufacturers proportionally produce more cars to meet that demand.