Which of the following best describes the invisible-hand concept?

• A. Individuals pursuing their own self-interest unintentionally benefit society as a whole through market mechanisms.
• B. Government intervention is necessary to allocate resources efficiently in the economy.
• C. Businesses must always act in the public interest to achieve economic growth.
• D. Markets fail to coordinate buyers and sellers without central planning.

Answer: (A)

Verified step by step guidance

1. Understand that the invisible-hand concept is a fundamental idea introduced by Adam Smith, which explains how individuals acting in their own self-interest can lead to positive outcomes for society as a whole.
2. Recognize that this concept relies on market mechanisms, where buyers and sellers interact freely, and prices adjust to allocate resources efficiently without the need for central planning.
3. Note that the invisible hand suggests that government intervention is not always necessary for efficient resource allocation, as the pursuit of self-interest can unintentionally promote social benefits.
4. Compare the given options to identify which one aligns with this idea: the correct description should emphasize individuals' self-interest leading to societal benefits through market forces.
5. Conclude that the best description is the one stating that individuals pursuing their own self-interest unintentionally benefit society as a whole through market mechanisms.