The Market System and the Circular Flow Essay Example | Topics and Well Written Essays - 250 words

The Market System and the Circular Flow - Essay Example The idea of the invisible hand suggests that when competition is assumed, public and private interests coincides. The visible hand also suggests that if the profits of the firms are maximized, the society’s output would in return be maximized. The visible hand theory has two main virtues in the marketing system where it creates room for economic freedom and allocates resources effectively and efficiently. The invisible hand theory also suggests that it is individual’s motivation that drives the growth and development of the economy. EcoCommerce101 suggests that invisible hand theory should the concept of transaction among two individuals. The generated information is absorbed by the two economic participants, therefore, allowing proper allocation of resources. Individuals will always try to produce and provide best goods and services that the people are willing and able to buy; therefore, promoting the interests of the society (Basu, 2010). Meanwhile, the government is also responsible in regulating the types of businesses to be established in a certain region to avoid congestion. The government uses the idea of imposing high taxes to its resources. Conclusively, it does not mean invisible hand is only beneficial t o the economy, but the participants might also experience