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    Say S Law of Markets

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    Anmol Sharma
    1) Say's Law states that supply creates its own demand, meaning that production generates income that provides purchasing power for goods and services, so supply and demand are always in balance. 2) The key assumptions are a competitive market, flexible prices, money acting as a veil, no hoarding, and state neutrality. 3) Critics argue that general overproduction and unemployment are possible if savings are greater than investment or in cases of trade cycles, and Say's Law does not ensure automatic adjustment of supply and demand.

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    Say S Law of Markets

    Uploaded by

    Anmol Sharma
    156 views8 pages
    1) Say's Law states that supply creates its own demand, meaning that production generates income that provides purchasing power for goods and services, so supply and demand are always in balance. 2) The key assumptions are a competitive market, flexible prices, money acting as a veil, no hoarding, and state neutrality. 3) Critics argue that general overproduction and unemployment are possible if savings are greater than investment or in cases of trade cycles, and Say's Law does not ensure automatic adjustment of supply and demand.

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    1) Say's Law states that supply creates its own demand, meaning that production generates income that provides purchasing power for goods and services, so supply and demand are always in balance. 2) The key assumptions are a competitive market, flexible prices, money acting as a veil, no hoarding, and state neutrality. 3) Critics argue that general overproduction and unemployment are possible if savings are greater than investment or in cases of trade cycles, and Say's Law does not ensure automatic adjustment of supply and demand.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    156 views8 pages

    Say S Law of Markets

    Uploaded by

    Anmol Sharma
    1) Say's Law states that supply creates its own demand, meaning that production generates income that provides purchasing power for goods and services, so supply and demand are always in balance. 2) The key assumptions are a competitive market, flexible prices, money acting as a veil, no hoarding, and state neutrality. 3) Critics argue that general overproduction and unemployment are possible if savings are greater than investment or in cases of trade cycles, and Say's Law does not ensure automatic adjustment of supply and demand.

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    Say’s Law of Markets

    Say’s Law
    J B Say: Classical Economist
    Propounded a brief law relating to markets
    in his famous book: Traite d’ ‘Economique
    Politique’
    This law is known as Say’s law of markets
    J B Say says, “ Supply creates its own
    demand.”
    He says, “ it is production which creates
    market for goods.”
    The act of production generates income in
    form of rent, wages, interest and profit.
    By providing income to factors of production
    supply generates its own demand.
    Any increase or decrease in supply will bring
    proportionate increase or decrease in
    purchasing power of household. As a result
    there will be equi proportionate increase or
    decrease in demand in the economy.
     So level of demand is always matched by
    level of supply.
    Assumptions of Say’s Law of Markets
    Perfectly Unlimited

    competitive Opportunities for


    market labour and capital
    The large extent
    Flexible Prices
    of market
    Money- a veil
    Long period
    No Hoarding Production
    State is neutral according to
    consumer’s
    preference
    Explanation of Say’s Law of Markets
     Barter Economy: In  Monetary Economy: In
    barter economy when a such economies money
    producer brings product acts as a medium of
    to market for sale this is exchange: Classicals.
    done to get other goods So seller sells his
    in exchange from product in market, gets
    market. So supply money in return and
    always represents
    buys other goods and
    demand for other goods
    services with it. The
     So every seller is a buyer
    value of demand so
    also. Supply creates its
    created will be equal to
    own demand in barter.
    value of supply.
    Monetary Economy with savings: In real life
    people do not spend their entire income on goods
    and services. They do saving also. As a result
    aggregate demand in the economy falls to the extent
    of savings effected.
    However, classicals held the view that this law still
    applies despite of savings in the economy. Because
    people convert their savings into investment. As a
    result AD= C plus I.
    If due to certain reasons, savings is more than
    investment, then rate of interest will change in such
    a manner that saving will become equal to
    investment. Concluding, Say’s law applies to
    monetary economy also.
    Implications of Say’s Law
     General overproduction  Equality between
    is impossible saving and investment
     General unemployment  Possibility of unlimited
    is impossible output and growth of
     Partial over production capital
    and partial  Money is but a veil
    unemployment are  Policy implications
    possible.  Say’s own observations
     Use of unemployed
     Quantity theory of
    resources pay for itself
    money and Say’s law
     Automatic adjustment
    Criticism of Say’s Law
     General over  Money is not merely
    production is possible medium of exchange
     General unemployment  Need for state
    is possible interference
     Lack of automatic
     Trade Cycles
    adjustment
     Long term
     Say’s law is not logical
     Equality between equilibrium
     Under employment
    saving and investment
    equilibrium is
    possible

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