Is this true or false? From Walras’s law it follows that in a market with two...

Is this true or false?

From Walras’s law it follows that in a market with two goods, if demand equals supply in one market, then demand must equal supply in the other market.

Expert Solution

Statement of walrus law : Excess demand in one market is matched by excess supply in other market. In other words examined market is in equilibrium if all other markets are in equilibrium.

Answer : True ; if demand is equal to supply in one market, then demand must equal supply in other market.

Reason : we are given 2 markets only. According to walrus law, examined market , which is the second market , should also be in equilibrium given market 1 is equilibrium. Since market one has no additional or lack of demand and supply, it must be noted other market has no compensation factor , hence is also in equilibrium, given only 2 markets in system.

Rahul Sunny answered 1 year ago

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