Google
Saturday 
February 4, 2023 

AmosWEB means Economics with a Touch of Whimsy!

AmosWEBWEB*pediaGLOSS*aramaECON*worldCLASS*portalQUIZ*tasticPED GuideXtra CrediteTutorA*PLS
APP: The abbreviation of average physical product, which is the quantity of total output produced per unit of a variable input, holding all other inputs fixed. Average physical product, usually abbreviated APP, is found by dividing total physical product by the quantity of the variable input. Average physical product is actually just another name for average product (AP). But don't be confused by the extra term (physical).

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 Qualifications

The 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 Politics

The 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.

<= INVESTMENT, PRODUCTION POSSIBILITIESINVOLUNTARY EXCHANGE =>


Recommended Citation:

INVISIBLE HAND, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2023. [Accessed: February 4, 2023].


Check Out These Related Terms...

     | capitalism | free enterprise | laissez faire | pure market economy |


Or For A Little Background...

     | allocation | three questions of allocation | incentive | consumer sovereignty | privatization | conservative | liberal |


And For Further Study...

     | seven economic rules | specialization | division of labor | economic analysis | economic goals | mixed economy | political views | dismal science | government functions |


Search Again?

Back to the WEB*pedia


APLS

GRAY SKITTERY
[What's This?]

Today, you are likely to spend a great deal of time at a flea market wanting to buy either a birthday greeting card for your grandfather or a weathervane with a cow on top. Be on the lookout for pencil sharpeners with an attitude.
Your Complete Scope

This isn't me! What am I?

In the late 1800s and early 1900s, almost 2 million children were employed as factory workers.
"The greater danger for most of us is not that our aim is too high and we miss it, but that it is too low and we reach it."

-- Michelangelo Buonarroti, Painter and Sculptor

ATO
At The Opening
A PEDestrian's Guide
Xtra Credit
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



| AmosWEB | WEB*pedia | GLOSS*arama | ECON*world | CLASS*portal | QUIZ*tastic | PED Guide | Xtra Credit | eTutor | A*PLS |
| About Us | Terms of Use | Privacy Statement |

Thanks for visiting AmosWEB
Copyright ©2000-2023 AmosWEB*LLC
Send comments or questions to: WebMaster