DEFINITION of 'Walras' Law'

An economics law that suggests that the existence of excess supply in one market must be matched by excess demand in another market so that it balances out. So when examining a specific market, if all other markets are in equilibrium, Walras' Law asserts that the examined market is also in equilibrium. Keynesian economics, by contrast, assumes that it is possible for just one market to be out of balance without a "matching" imbalance elsewhere.

BREAKING DOWN 'Walras' Law'

Walras' law is named after French neoclassical economist Léon Walras, who created general equilibrium theory and founded the Lausanne School of economics. Walras' famous insights can be found in the book Elements of Pure Economics, published in 1874.

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