Question

Phenomenon of invisible hands will help the Russians to understand the intricacies of the economic system and a market based economy. As per the concept of invisible hands, individual action for the benefit of oneself creates social benefits for the others.
In the given scenario also, people having land and resources in Russia would like to produce something out of the lands. Here they will identify the products in demand and accordingly hire workers. Now , workers will be paid the salary and wages for their contributions. Later on , workers will buy the products and spend their earnings . In the way, a two sector economy is created.Slowly , demand for new products are created and it is served by the production of new products in the market. It establishes the aggregate demand and aggregate supply and equilibrium between the two as the economy starts to growing.
Here invisible hand causes land owners to start production. In return, it benefits others as people get employment and wages. These income are again spent on goods , it creates income for the producers. Thus the action benefits each other. Later on government and regulatory bodies are formed to oversee the well being of the economy and prevent evil forces from exploiting the market players. It is further strengthened by international trade between two economies and the development of different market structures in one economy.
As per the the free market , demand of product is met by the supply of product.Bread manufacturers hire workers to produce bread and pay them a salary and wages. Later on, these bread are sent to the market and purchase by consumers. Thus ,circular flow of income takes place between two sector named as firms and households.
As the demand of bread increases , the supply of bread also increases. Thus new employment opportunities are created and it expands the size of the economy.
Excellent answer. ...Could you or someone expand the process you described to include the supply chain for bread. The approach the lesson of the pencil gives.

Answer 1

As mentioned about the demand chain, the supply chain also has a ravening alteration due to this phenomenon of invisible change. The Supply chain of bread starts from the production unit manufacturing a particular quantity of bread. When the manufacturer estimated or calculates the market equilibrium, the firm would notice the increased demand in the market. This noting will induce the firm to produce more bread. It is essential to note here that, it is possible that the firm may also increase the price of the bread when it sees a huge demand in the market, however this is particular to the super normal demand in the market. When the firm produces more bread from the increased savings as a result of the profit from increased price, more units of bread are now available in the market. The more units of bread require more transportation mediums to reach to the distributor. Here the distributor earns a particular amount of profit due to more requirement of the transportation mechanism. The marketing of the bread also needs to be widespread and hence here too the marketing agent or firm also erns increased profit. Then, it is the distributors who also earn extra profit from the distribution of the increased quantity of bread in the market. Further, the retailers also earn extra profit when they sell more quantity of demanded bread in the market.