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2.3 • Confronting Objections to the Economic Approach 41

FIGURE 2.6 The Tradeoff Diagram Both the individual opportunity set (or budget constraint) and the social

production possibilities frontier show the constraints under which individual consumers and society as a whole
operate. Both diagrams show the tradeoff in choosing more of one good at the cost of less of the other.

Third, self-interested behavior can lead to positive social results. For example, when people work hard to make

a living, they create economic output. Consumers who are looking for the best deals will encourage businesses

to offer goods and services that meet their needs. Adam Smith, writing in The Wealth of Nations, named this

property the invisible hand. In describing how consumers and producers interact in a market economy, Smith

wrote:

Every individual…generally, indeed, neither intends to promote the public interest, nor knows how
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