1. what does invisible hand of the marketplace do?

The unobservable market force that helps the demand and supply of goods in a free
The concept of the
market to reach equilibrium automatically is the invisible hand.
“invisible hand” was invented by Adam Smith. It refers to the invisible market
force that brings a free market to equilibrium with levels of supply and
demand by actions of self-interested individuals.
The invisible hand allows the market to reach equilibrium without government or
restrictions. Invisible hand manipulate the economic markets. The invisible
hand is usually the movement of supply and demand in a market, and this is
caused by the production and need for products. Thus, supply and demand
are the primary movers of market prices which in turn affects an economy
under the free market system. 

To explain, when there is an oversupply of goods, prices fall so that demand

increases. When there is an undersupply of goods, prices rise to encourage
producers to increase production and supply. These two forces push the market
towards the equilibrium point in what is known as ‘the invisible hand’.
As we can see from the graph above, the invisible hand constantly pushes the
market back into equilibrium. So at point P3, the market is in a state of excess
supply. The high prices have driven producers to oversupply the market.
We then have the opposite effect whereby the price is low and there is a large
amount of excess demand, which is shown as P2. Through the invisible hand,
producers increase prices in order to capture excess consumer surplus. This is
because there are more consumers than it is able to produce for, so it can
charge higher prices. In turn this encourages suppliers to produce more. Supply
then increases and demand falls to reach the equilibrium point.

When supply and demand find equilibrium naturally, oversupply and shortages
are avoided. In a free market scenario where there are no regulations or restrictions imposed
by the government, if someone charges less, the customer will buy from him. Whenever enough
people demand something, it will be supplied by the market and everyone will be happy. The
seller end up getting the price and the buyer will get better goods at the desired price.

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2. Two main causes of market failure

Market failure refers to the inefficient distribution of goods and services in the
free market. In a typical free market, the prices of goods and services are
determined by the forces of supply and demand, and any change in one of the
forces results in a price change and a corresponding change in the other force.
The changes lead to a price equilibrium. Market failure occurs when there is a
state of disequilibrium in the market due to market distortion. It takes place
when the quantity of goods or services supplied is not equal to the quantity of
goods or services demanded. 

 Externalities lead to market failure because a product or service's

price equilibrium does not accurately reflect the true costs and benefits of
that product or service. Equilibrium, which represents the ideal balance
between buyers' benefits and producers' costs, is supposed to result in the
optimal level of production. However, the equilibrium level is flawed when
there are significant externalities, creating incentives that drive individual
actors to make decisions which end up making the group worse off. This is
known as a market failure.
  In a monopoly, a single supplier controls the entire supply of a product. ... Supply can be
restricted to keep prices high. This leads to underprovision, or scarcity.In the case of
monopolies, abuse of power can lead to market failure. ... A monopoly is an imperfect
market that restricts output in an attempt to maximize profit. Market failure in a monopoly
can occur because not enough of the good is made available and/or the price of the
good is too high.

3. why ppf is bowed outward

The production possibilities curve is bowed in shape because of the

law of increasing opportunity cost, which explains the idea that the
more units of a product are produced, the less capability the
economy has of producing other products. The Production
Possibilities Curve represents the choice society faces regarding
whether to invest resources (inputs) into producing one kind of
product or service or another. B Because when production unit produces one
unit of a product, then the opportunity cost of the other product increases i.e. the
concave/outward bowed curve represents the increasing opportunity cost with the increase
in the unit of other product.

The PPF is bowed outward because resources are not all equally productive in all
activities. ... The more we produce of either good, the less productive are the additional
resources we use and the larger is the opportunity cost of one unit of that good.

Movement along the demand curve depicts the change in both the factors i.e. the price and
quantity demanded, from one point to another. Other things remain unchanged when there is a
change in the quantity demanded due to the change in the price of the product or service,
results in the movement of the demand curve.

Change in demand is represented by the shift of the demand curve. Quantity demanded is
where the price is the factor. The movement along the demand curve only happens if there is a
change in price. If there is a movement along the curve, the demand does not change.

Demand Curve is a graph, indicating the quantity demanded by the consumer at different prices.
The movement in demand curve occurs due to the change in the price of the
commodity whereas the shift in demand curve is because of the change in one or more factors
other than the price.
 Demand Curve will move upward or Demand Curve will shift rightward
downward. or leftward.

Consumer surplus is the difference between the price a consumer pays for an item and the
price he/she is willing to pay for the item. Consumer surplus always increases as the price of a
It's a measure of the
good falls and decreases as the price of a good rises.
additional benefit that consumers receive because they're paying less for
something than what they were willing to pay. An increase in the price will reduce
consumer surplus, while a decrease in the price will increase consumer surplus. 

Consumer surplus is one way to determine the total benefit that consumers
receive from their goods and services. If a consumer is willing to pay more for
an item than the current asking price–the market price–then they are
theoretically receiving an additional benefit by purchasing the item at that
price. If the price was their maximum willingness to pay, theoretically, they
would get less benefit from the purchased product.
For example, before making a purchase, most consumers decide how much
they are willing to spend on an item. Suppose there is a college student that
decides that a pair of sneakers is worth no more than $80. If the price of the
sneakers is $100, then the student may decide not to buy them. However, if
the price of the sneakers is $60, the student will likely make the purchase.
They may also feel like they got a special deal. And in economic terms,
they've experienced a surplus of $20: the difference between the maximum
amount the student was willing to spend ($80) and the market pric e of the
sneakers ($60).