Adam Smith's Theory of the Invisible Hand

 Adam Smith came out with an analysis of market trends of production and consumption. He concluded that the markets have an inherent potential of becoming efficient. It is as if there was an invisible hand that guides the market to a level that is good for society. His theory has remained throughout all of economics, even after two hundred years. That in a free and unregulated market, where anybody can become a producer or a consumer, people's demand of different goods and their production of the same good will be equal, and the allocation of their resources for production and consumption of different goods will be optimal for the welfare of the society. Demand refers to the willingness of people to pay a price for a particular good. when the demand is more, the market price of a good rises, thereby making it attractive for more producers to start producing. The entry of new producers increases the supply, and in turn reduces the prices.