What does Say's law advocate?

Say's Law is a fundamental principle in classical economics that posits that production is the source of demand. In other words, when goods and services are created, they inherently generate a demand for other goods and services. This concept reflects the idea that supply creates its own demand.

When producers generate goods, they must possess some form of purchasing power to sell those goods, often through their wages or profits gained from production. As they produce, they must also consume, leading to an overall equilibrium where all produced goods will find a market, assuming no frictions exist.

This principle helps explain why the economy tends to self-adjust towards full employment in the long run, as the creation of goods leads to income which will then be used to purchase those goods. It emphasizes the role of supply side factors in driving economic growth, contrasting with demand-side theories that focus primarily on the importance of consumer demand to the economy. This is why the statement highlighting that supply creates its own demand is reinforced by Say’s Law, making it the correct answer.