Adam Smith’s Invisible Hand

Sample Solution

I am an entrepreneur looking to start a new business in a small town. I am considering opening a restaurant, but I am not sure if there is enough demand for it. I know that I need to make a profit, but I also want to provide a good service to my community.

Explain how the invisible hand will lead you to consider the well-being of your potential customers over what you may call your short-sighted self-interest.

The invisible hand is a metaphor used by Adam Smith to describe how the self-interested actions of individuals can benefit society as a whole. In my case, the invisible hand would lead me to consider the well-being of my potential customers because I know that if I do not provide them with a good service, they will go elsewhere. This would hurt my business and make it less likely that I would be able to make a profit.

Full Answer Section

So, even though I am motivated by self-interest, I know that I need to consider the well-being of my customers if I want to be successful. I need to make sure that my restaurant is clean, that the food is good, and that the service is friendly. If I do these things, then my customers will be happy and they will come back again and again. This will benefit me because it will increase my sales and make me more money.

How might the invisible hand effect what good/service you provide?

The invisible hand could affect what good or service I provide in a number of ways. For example, if I know that there is a high demand for a particular type of food, then I might decide to open a restaurant that specializes in that food. Or, if I know that there is a need for a particular service, such as childcare or eldercare, then I might decide to start a business that provides that service.

The invisible hand could also affect the quality of the goods or services I provide. For example, if I know that my customers are willing to pay a premium for high-quality food, then I might be more likely to use high-quality ingredients and to prepare the food with care. Or, if I know that my customers are looking for a reliable and trustworthy childcare provider, then I might be more likely to invest in training and education for my staff.

Would the invisible hand effect the quality of goods/services you provide?

Yes, the invisible hand could affect the quality of the goods or services I provide. If I know that my customers are willing to pay a premium for high-quality goods or services, then I am more likely to provide them with those goods or services. This is because I know that if I do not, my competitors will and I will lose business.

However, the invisible hand is not always a perfect force. There are some cases where businesses may choose to provide lower-quality goods or services, even if there is demand for higher-quality ones. This could happen if the business is trying to cut costs or if it is not concerned about the long-term health of its business.

Ultimately, the decision of whether or not to provide high-quality goods or services is up to the individual business. However, the invisible hand can play a role in encouraging businesses to provide high-quality goods or services, especially if there is demand for them.

I hope this discussion has helped you to understand the invisible hand and how it can affect businesses.