What is the Invisible Hand in Economics in simple words
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ELI5 answer:
I need batteries sometimes, and it doesn’t really matter who I buy them from. I found them at a local store for $15, but then I checked on Amazon and found them for only $10. I decided to buy the cheaper batteries to save some money.
The local store probably isn’t going to sell as many batteries because they are more expensive. So, the store is going to have a harder time staying in business. Maybe they will find a way to lower their prices for batteries, or perhaps just sell other things instead. Either way, selling batteries at $15 isn’t working out well for them right now.
This is the invisible hand. No one is making it illegal for them to overcharge for batteries, but no one is making me pay the higher price. So their business decisions will be guided by the invisible hand of people making other purchasing decisions and choosing not to buy their batteries.
Now, apply this same logic to everything else. Food, services, jobs, etc.
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