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Named after the French economist Jean Baptise say (1767–1832), the law proposes that aggregate supply creates its own aggregate demand.
The logic of the law goes like this–the very act of production generates an income (in the form of wages, salaries, profits, etc.) exactly equal to the output which if spent is just sufficient to purchase the whole output produced. Ultimately, it gives an important clue, i.e., in order to reach full-employment level all that is needed is to increase the aggregate supply.
The key assumption behind the law is that the economic system is ‘supply- led’ and that all income is spent. But in practice, some income ‘leaks’ into saving, taxation, etc., and there is no auto-guarantee that all income is ‘injected’ back as spending. This is why others suggest for a ‘demand-led’ idea of the economic system under which demand creation is attended vigorously.