Question

Which one of the following statements defines the Say's Law of Market?

• A. Supply creates its own demand.
• B. Everything else being equal, producers offer to sell more of a product at a higher price than at a lower price.
• C. Everything else being equal, consumers buy more of a product as its price falls and less as its price rises.
• D. Aggregate supply in a market is always equal to aggregate demand.

Hint:

Say’s Law: Production (supply) creates the income to buy goods (demand).

Answer 1

The Correct Option is A

Step 1: Producing a good pays out wages, rent and profit equal to its value, generating income.
Step 2: That income becomes purchasing power for buying other goods, so production itself generates matching demand.
Step 3: This "production creates demand" logic is Say's Law, stated as "supply creates its own demand", so option (1) is correct.