To: Hawkmoon who wrote (68473 ) 11/23/2010 11:08:54 AM From: elmatador Respond to of 218055 It flows form Say that: if a manufacturer wants to sell to a mass market, he knows that he can't wait until everyone can afford something expensive; he knows that he has to market his product at a low enough price that it will begin to sell [6]. ELMAT:China understands that and that is why it is selling here right now. In more technical economic terms, if the supply function increases (from "supply, a" to "supply, b" in the chart below), which means that it becomes possible to produce a greater quantity of goods for a given price, then, if the demand function does not also increase, a greater quantity of goods will end up being sold anyway as prices fall to a market clearing level (from "price, a" to "price, b" in the chart). friesian.com Say's Law may also mean that the demand function will increase also, but it is not necessary to get into that part just to see how the basic price mechanism works (and, indeed, if demand increases, prices might not fall). A greater quantity of demand will result from an increased supply function even if no other factors are involved -- as long as prices are allowed to fall (in Germany now, businesses are fined for cutting prices). When industrial production increases and more goods become available, some old goods will go unsold as money moves over to the new goods, and prices will have to fall right across the board. That is called "deflation," and it is what happened in the United States from the end of the Civil War until 1896, while the United States grew into the largest economy in the world. Money became more valuable, and wages continued to buy as much as was desired of total production (the Edsels, of course, don't sell, except for bankruptcy liquidation) [7].