Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
At first, Say's Law may seem 'obvious'. Though, it's not - actually, it's highly controversial. The reason it may seem obvious is that you have perhaps learned from microeconomics that in equilibrium, demand is equal to supply. If you're outside equilibrium, prices will adjust and you shall be taken back to equilibrium.
This isn't the motivation behind Say's Law which isn't an equilibrium condition. In the classical model, YS and YD are real variables which don't depend on the price level. This may strike you as odd. YS relies only directly on L and K and indirectly on the real wage. If price level increases in the classical model, wage level will increase by the same amount leaving the real wage unchanged. As for aggregate demand, if price level and wage level both increase (by the same amount), there is actually no change for the consumers. If all prices double whereas you income doubles, there is no need to adjust you demand.
The justification for Say's Law isn't as an equilibrium condition through price adjustments. No price adjustment in the world would equilibrate aggregate demand and aggregate supply in the classical model. In its place, justification is based on income effects instead of on price effects: higher supply Þ higher income Þ higher demand.
The reason why Say's law is so controversial is following. Assume that investors and consumers fear that the economy will slow down. They may then decide to save a substantial part of their income and aggregate demand may not be equal to aggregate supply.
.measure to control inflation
What are the best criteria to select peers for a country ?
what is credit multiplir and how does it work
Explain why a perfectly competitive firm does not expand its sales without limit if its horizontal demand curve indicates that it can sell as much as desires at the current market
The market demand for a factor The market demand curve for any input is not simply the horizontal summation of the individual demand curves of all the firms. This is due to th
Consider the utility function u(x1, x2) = x1x2. (a) Graph the indifference curves for utility levels 1 and 2. (They are symmetric hyperbolas Asymptotic to both axes). (b) Graph the
A firm with two factories, one in Michigan and one in Texas, has decided that it should produce a total of 500 units to maximize profit. The firm is currently producing 200 units i
Q. Control of ochratoxin? Control: Once ochratoxin A has been formed in a food, it is difficult to remove by most forms of food processing. Cooking with or without previous soa
What is income generation process
what is the cause of inflation in PNG
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +91-977-207-8620
Phone: +91-977-207-8620
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd