Hello Friends welcome to my website, in today’s article we are going to know about Say’s Law of Market (limitations and propositions of Says law of market). So let’s discuss in details.
What is Say’s law of Market?
In 19th century French economist J.B Say provided a law which is popularly known as Say’s law of market. According to this law “Supply creates its own demand”.
Therefore there can not be general over production and problem of unemployment in the economy. This definition is based on the following statement.
• Production create the market for goods – When producer obtain the various inputs to be used in the production process, they create income.
The labour will purchases goods from the market with their wages derived from producers. In this way supply creates its own demand.
• Barter system is basis – Say’s law is applicable to a barter economy where goods are exchanged for other goods. Whatever is produced is ultimately consumed in the economy.
Propositions of Say’s Law of Market
Says law of market is based on some important propositions. This are given below-
(i) This law is based on the proposition that there is always full employment in the economy. Production will continue to increase until the level of full employment is reached. In such a situation, the level of production will be maximum.
(ii) Another propositions of the law is that there is perfect competition both in the labour market and product market.
(iii) Say’s law is based on the propositions of closed capitalized economy which is guided by policy of laissez faire.
(iv) According to Say’s law, the size of the market is large enough to creates demand for goods.
(v) According to Say, whatever is saved is automatically invested for further production.
Limitations of Say’s Law of Market
Following are the important limitations or criticism of Say’s law of market-
• Say’s assume supply creates its own demand. But this propositions is not applicable in the real world, because people do not spend their entire income on consumption.
• Say’s law is based on the principle of laissez faire system where the role of the government is very limited. But in reality govt. plays a significance role in the economics system.
So friends, this was the concept of Say’s Law of Market. Hope you get the full details about it and hope you like this article.
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