Adam Smith, the famous man in our economic lesson. Sadly, the economic lesson is so boring, and it is not capturing the essence of what great thought he have.
He tells a lot about money, invisible hand, division of labor, capitalist and free market and many more. A break through on his era and still marvelous today.
We start from division of labor, this approach could increase the worker efficiency by several folds. When people doing specific task, he will become a master, he can finish it faster yet cheaper. This efficiency gain makes commodity cheaper and affordable.
This enable people to start exchanging surplus through barter, therefore market start established.
When people start the market, price started to be established, through humble negotiation. People is free to conduct free exchange, the only bound is competition.
This proses yet also very important, people will try to maximise profit, with minimum effort to gain maximum result. This exchange is very profan, the only thing they consider is their benefit, and their self interest
Through countless exchange activity everything start goes to equilibrium, too much supply will decrease price, therefore supplier tend to decrease their production, consumer tend to increase consumption.
Too much demand will increase price, therefore consumer will decrease their consumption and producer increase their production.
Therefore price will agitate around this price.
Anyone who is less efficient will be kicked out from market, due to their inability to maintain profit.
Anyone who is efficient can get big margin.
Therefore market will provide the best supplier.