You might be wondering, what is Say’s law? But first, you need to understand the economic principles underlying it. The law explains why sellers in a large city receive more business than those in sparsely populated rural areas. The basic reason is simple: production must come before demand. The result is that the amount of wealth produced exceeds the amount of available demand. In other words, an economy in which the price of goods falls below the cost of production will experience a recession.
Say’s law is an economic principle that states that “supply creates its own demand.” In other words, if there is an increase in the supply of a good or service, the demand for that good or service will also increase. This law is based on the assumption that people are rational and will always act to maximize their own self-interest.
A famous economic theorist from the early nineteenth century, Jean-Baptiste Say, believed that the production of goods creates demand for other goods. This theory is based on the fact that more goods are produced, the more they are needed to produce them. So, if the goal is to promote prosperity, the best way to do it is to increase production and decrease consumption. This is why Say argues that the creation of more money will only lead to inflation and not real demand.
Say also argued that an oversupply of goods in a market creates an excess of it. In other words, a greater amount of consumption results in a decrease in the amount of investment. This, in turn, creates an excess of money in the market. And since this excess of goods is the result of the unemployed labor, it is also known as the Say’s law. If you’re interested in knowing more about Say’s law and its implications, read on.
In conclusion, Say’s Law is a fundamental economic principle that states that supply creates its own demand. This means that an increase in the supply of a good or service will lead to an increase in demand for that good or service. As a result, Say’s Law is often used to explain how free markets work and why they are able to allocate resources efficiently.