The Walras's law

 

 Walras's law is named after the economist Léon Walras of the University of Lausanne who formulated the concept in his Elements of Pure Economics of 1874.

 

The law states that the value of excess demand is zero. The excess demand, zi, for good i is the difference between demand, xi, and the sum of supply from firms, yi, and the initial endowment, ωi; h unience zi = xi − yi − ωi. Noting that demand and supply are both functions of prices, Walras's law states that for an economy with n goods for any prices pi, i = 1,…, n. The law implies that in an economy with n markets there are only n − 1 independent demand–supply equations. Hence, when the general equilibrium for an economy with n goods is studied only n − 1 markets need to be analysed. If a set of prices can be found that place these n − 1 markets in equilibrium then the prices also ensure the nth market is in equilibrium.