Q.Write a short note on: Say's Law of Market

Laissez faire is the classical principle of government non-interference, letting the free market and the price mechanism run the economy.

Explanation

Laissez faire is a French phrase that means "allow to do" or "leave alone". It is the doctrine of the classical economists, who believed that the government should not interfere in economic affairs and should confine itself to basic functions like defence, justice and law and order. According to this principle, the economy works best when individuals are free to pursue their own economic interests and the forces of demand and supply (the price mechanism) are left free to allocate resources. It formed one of the main assumptions of the classical theory …

Say's Law of Markets, propounded by J. B. Say, states that 'supply creates its own demand' — production itself generates the income needed to buy all that is produced, so there can be no general glut or involuntary unemployment; the economy automatically tends to full employment.

Meaning

Say's Law of Markets, named after the French classical economist J. B. Say, is summed up in the phrase 'supply creates its own demand'.

The idea is that the act of producing goods and services itself creates an equal amount of income (in the form of wages, rent, interest and profit) in the hands of the factor owners. This income provides exactly the purchasing power needed to buy all that has been produced. Therefore, total demand always equals total supply, and there can be no general overproduction (glut) and no lasting involuntary unemployment.

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