Question

hat is meant by the "invisible hand"? Explain the adjustment process if the price is above the market equilibrium price. Explain the adjustment process if the price is below the market equilibrium price. How is the market equilibrium price determined? Your answer should take approximately 1 page and draw from the material in Week 2. The proper formatting is as follows: 12 point Times text, double spaced, 1" margins. You must cite all references. Failure to cite a reference will result in a zero on the entire exam.

Answer 1

Invisible hand are the unobservable market force that helps market price to seek equilibrium.

When price is above the equilibrium price people stop purchasing that good and lack of demand causes product surplus and to get the stock out, producers reduces the price of the stock.

When price is below the equilibrium price, people start buying a lot of that product, causing shortage and producers increases the price.

Market equilibrium price is determined where the demand of any commodity is equal to its supply and everyone's demand is fulfilled.

References - " first principles of economics"