A fundamental assumption for economic analysis is that economic agents, be it an

Question

A fundamental assumption for economic analysis is that economic agents, be it an individual, a household or a firm/business, tend to make choices and select alternatives rationally. The rational economic choice (decision) implies that people are driven by the rational pursuit of self-interest, and engaged in economic decisions to maximize this self-interest.

By rational economic choice, economists mean that people try to make the best choice they can, given the available resources at their disposals (money, time, etc.) and information.

Self-interest is when individuals make economic decisions that are in their own best interest. On the other hand, social interest is when choices are made that benefit society as a whole. Economists argue that social interest can be attained by individual decision makers acting in their own self-interest. This process is what Adam Smith called the invisible hand, which has been the foundation of the market economy.

Create an example to demonstrate how an individual or firm acting out of self-interest to maximize profits by offering goods or services in economic markets benefit consumers

Explanation / Answer

Relationship:
Self-interest is when individuals make decisions that are in their own best interest. Like when you decide to get up in the morning to go to work and make money, or when you pay the grocery store for food that you would like to eat.  
Social interest is when choices are made that benefit society as a whole. Imagine one person, who is all knowing and really cares about the people. Every action this benevolent dictator made would be in the social interest of the society. The cool thing about social interest is that it can also be attained by individual decision makers acting in their own self-interest. This process is what Adam smith called the invisible hand.
Smith wrote, "It is not from the benevolence of the butcher, the brewer or the baker that we expect our dinner, but from their regard to their own self-interest." Smith's explanation of the invisible hand showed that through the self-interested actions of dozens, hundreds and even thousands of people, without any centralized planning, goods and services get created that benefit both producers and consumers.
Example:
When individuals act in their self-interest, they go to work and buy things because it makes them happy. But by working and purchases things, they are also contributing to society and the social interest. Think about the creators of Facebook, they acted in their own self-interest creating it for profit. However, in the process, we all benefited from the increased networking and communication with friends. Thus individuals acting in self-interest can lead to optimal social interest outcomes, just like if a benevolent dictator was in charge.
Conflict:
From an economics perspective we have to debate the role of privilege- and rent seeking special interest groups, the phenomena of lobbyism and corruption, corporate scandals, the role of hedge funds, private equity, derivatives, investment-banking, gambling/speculation on the stock-exchange, insider-dealings, market manipulation, the alleged

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