|
|
FACTOR SUPPLY DETERMINANTS: An ceteris paribus factors held constant when the factor supply curve is constructed that cause the curve to shift when they change. Because factor supply differs greatly depending on the particular factor analyzed (labor, capital, land, and entrepreneurship), factor supply determinants also come from different sources. Several key determinants come from the five standard market supply determinants: (1) resource prices, (2) technology, (3) other prices, (4) sellers' expectations, and (5) number of sellers. However, because labor is people (who receive satisfaction from working) three additional determinants come from market demand: (1) income, (2) preferences, and (3) other prices. Last, but not least, is the mobility of resources, including both geographic and occupational mobility.
Visit the GLOSS*arama
|
|
|
|
                           INVISIBLE HAND: The notion that buyers and sellers, consumers and producers, households and businesses, by pursuing their own self-interests do what is best for the economy automatically without any government intervention, as if guided by an invisible hand. The invisible hand is an essential component of the economic analysis of markets developed by Adam Smith in The Wealth of Nations. It continues to be a cornerstone of more conservative economic policies that call for limits on government intervention in the economy.How Does It Work?The logic of the invisible hand is best illustrated through market competition among buyers and sellers. On the demand side of a market, "selfish" buyers seek to obtain the most output at the lowest price. On the supply side of a market, "selfish" sellers seek to obtain the highest price for the least output. Both sides are guided by the "selfish" goal of getting the most and giving up the least.Competition among buyers and sellers generates equilibrium and results in equality between the maximum demand price that buyers are willing to pay and minimum supply price that sellers are willing to accept. When the demand price and the supply price are equal, the market is efficient. When markets throughout the economy are efficient, there is an efficient allocation of resources. The invisible hand of market forces is thus guiding the economy to economic efficiency without the need for government intervention. A Few QualificationsThe invisible hand of competition does tend to move markets and the economy toward efficiency, it is very effective, unless it encounters roadblocks along the way. The primary roadblocks come under the heading of market failures. They include: (1) goods that are characterized by nonrival consumption and/or problems excluding nonpayers from consumption, (2) limited competition and market control by either buyers or sellers, (3) external costs or benefits that are not reflected in demand price or supply price, or (4) limited or imperfect information about the product or market transaction by either buyer sellers.In each of these cases, the invisible hand of the market does not achieve efficiency without government intervention. A Word About PoliticsThe invisible hand notion has long been a rallying cry for those who favor little or no government intervention in the economy. The logic is relatively clear--if the markets and the economy can achieve efficiency without actions by government, then government actions are not needed to achieve efficiency.Political conservatives, who champion limited government intervention, tend to embrace the invisible hand notion a great deal more than political liberals, who promote activity government intervention.
Recommended Citation:INVISIBLE HAND, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2021. [Accessed: May 13, 2021].
Check Out These Related Terms... | | | | |
Or For A Little Background... | | | | | | | |
And For Further Study... | | | | | | | | | |
Search Again?
Back to the WEB*pedia
|
|
|
ORANGE REBELOON
[What's This?]
Today, you are likely to spend a great deal of time visiting every yard sale in a 30-mile radius hoping to buy either a set of serrated steak knives, with durable plastic handles or a pair of blue silicon oven mitts. Be on the lookout for telephone calls from former employers.
Your Complete Scope
This isn't me! What am I?
|
|
|
In 1914, Ford paid workers who were age 22 or older $5 per day -- double the average wage offered by other car factories.
|
|
|
"The tragedy of life is not so much what men suffer, but rather what they miss. " -- Thomas Carlyle, Historian
|
|
G-7
Group of Seven
|
|
|
Tell us what you think about AmosWEB. Like what you see? Have suggestions for improvements? Let us know. Click the User Feedback link.
User Feedback
|
|
