[This is part of the series: The Complete Guide To Economics 101.]
What is the invisible hand theory?
The Invisible Hand Theory is is nothing but a market economy.
Adam Smith first spoke of the “Invisible Hand” in his classic book, Wealth Of Nations.
This is where goods and services are rationed through prices in the most efficient way possible.
This concept was born out of simple behaviors of human observation.
If the quantity of something is greater than the demand for it, prices tend to fall.
And, if the demand for something is greater than the supply of it, prices tend to rise.