Question

Which of the following are the assumptions of Say's Law of Market? A. The size of market is not capable of expansion
B. Perfect competition prevails in factor and product market
C. There is optimum allocation of resources
D. Labour and capital cannot be raised based on price mechanism
E. All savings are automatically invested

• A. A, B, C and D only
• B. B, C, D and E only
• C. B, C and E only
• D. C, D and E only

Hint:

Logic Tip: Say’s Law assumes flexible prices and automatic adjustment of savings into investment.

Answer 1

The Correct Option is C

Step 1:
Say's Law states: \[ \text{Supply creates its own demand} \]

Step 2:
Assumptions include:
• Perfect competition
• Optimum allocation of resources
• Savings are automatically invested

Step 3:

• Market size can expand $\Rightarrow$ A is incorrect
• Labour and capital can adjust through price mechanism $\Rightarrow$ D is incorrect

Step 4:
Correct assumptions are: \[ B,\; C,\; E \] Hence, the correct answer is: \[ \boxed{\text{(3) B, C and E only}} \]