Walras' law

The Walras' law (after Léon Walras ) is a rule of economics. She notes that balance in the sum in a perfect market supply and demand in all submarkets. In other words, the value of aggregate excess demand is always 0, the Walras' law implies that if n-1 markets are in equilibrium, and the last (market ) must be balanced.

Formal: ( with price and aggregate excess demand )

For example, if two markets exist, one for goods and one for money and on the goods market excess demand prevails ( ie more demand than supply ), must be reversed to find on the money market, a supply surplus (that is more supply than demand ), as the money can be spent only for goods but not enough goods are offered to satisfy the demand and vice versa, no one wants to make goods for money.

Household Theoretical Classification

In the microeconomic theory of the household, the fulfillment of the Walras law is discussed as a property Marshall'scher demand functions. It is ultimately only a redenominated formulation of the theorem outlined above, which could be formulated by analogy with demand surpluses. Be the Marshall'sche demand for the goods with associated prices below the budget condition

Be on all prices and the available budget is positive ( respectively ). Then, exactly fulfilled the Walras law, if:

That is, if the consumer spends his entire budget.