"Supply creates its own demand." This statement is called :

Question

Accepted Answer

The correct option is 2:
The statement "Supply creates its own demand" is famously known as Say's Law of Markets (often shortened to Law of Market in multiple-choice questions). This foundational principle of classical economics was attributed to the French economist Jean-Baptiste Say. The law states that the act of producing goods (supply) automatically generates the necessary income (via wages, rent, interest, and profits) required to purchase those very goods (demand). In simple terms, when producers bring goods to the market, the money paid out in the production process flows back to consumers, ensuring that there is always enough purchasing power to buy everything produced. Consequently, this theory implies that general overproduction or widespread unemployment is impossible in the long run, and the economy naturally tends toward full employment equilibrium.

The incorrect option is 1:
The Law of Demand describes the inverse relationship between the price of a good and the quantity demanded, assuming all other factors remain constant. It does not concern the relationship between aggregate supply and aggregate demand in the entire economy, unlike Say's Law.

The incorrect option is 3:
The Law of Supply describes the direct relationship between the price of a good and the quantity supplied by producers. This microeconomic principle focuses on how an individual producer responds to price changes, not the macroeconomic idea that production itself guarantees subsequent consumption.

The incorrect option is 4:
Law of Price is a general, non-specific term in economics, often referring broadly to how supply and demand forces interact to determine equilibrium price in a market. It is not the specific conceptual name given to the doctrine that supply generates its own demand.