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1618311762-1. Basic of Microeconomic
1618311762-1. Basic of Microeconomic
• Upward sloping “supply curve” depicts that as the price of a good increases, producers are incentivised
to produce more and hence supply of that good increases.
• The point at which these two curves intersect is called “market equilibrium”. This is the point where
demand matches supply.
• Adam Smith called it the ‘invisible hand’.
• Invisible Hand - the unobservable market forces causing unintended social benefits from self-
interested actions of individuals in a free- market economy.
• According to Adam Smith, the invisible hand sin a free market economy will yield maximum satisfaction
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because :
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employment is the average of all marginal products up to that level. Average and marginal products
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