Say’s Law of Market:
J. B. Say, a French economist, submitted his law of markets in his book, “Treatise on Political Economy” (1803). His law can be sum up as “supply generates its own demand”. This means that production of every good produces adequate income to make sure that there is adequate demand for the goods generated.
Each and every production that brings goods to market does so just in order to exchange them for other goods. This precisely defines that whatever be the level of output, and the income formed by that will essentially lead to an equivalent amount of spending and therefore deficiency of aggregate demand can’t take place. Therefore, Say discarded the view that there could be mass unemployment and general over-production. Only full employment succeeds in the economy. He made the suppositions as shown below:
1. Each and every income of the households is spent on the consumption of goods and services.2. There is no government action (i.e., public spending, no taxation, price control and so on).3. It is a stopped economy that is, no relationship with another economy.Whatever is generated symbolizes the demand for the other product. Additional supply is additional demand. Therefore Say’s analysis is taken on in terms of barter. Though, introduction of money in no manner affects the procedure. However, money-based economy is more proficient than barter economy. It is true that at times, misdirected production might outcome in temporary over-supply of a specific product in a specific industry. Say himself admits this verity. However this disequilibrium vanishes by the operation of the self-adjusting market forces. However general over-production or unemployment is not possible according to Say.
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