One of the early economic “laws” was called Say’s Law that stated that—supply creates its own demand. Using the circular flow chart, explain what this means and how an expanding population results in economic growth.

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Say's Law, named after the French economist Jean-Baptiste Say, states that supply creates its own demand. To understand this concept using the circular flow chart, let's break it down:

1. Circular Flow Chart: The circular flow chart represents the flow of goods, services, and money in an economy. It consists of two sectors: the household sector and the business sector.

2. Household Sector: This sector includes individuals and families who consume goods and services. They are the buyers in the economy and receive income from the business sector.

3. Business Sector: This sector includes all businesses that produce and sell goods and services. They are the sellers in the economy and generate income from the sales they make to the household sector.

4. Supply and Demand: In a simplified version of the circular flow, the business sector supplies goods and services to the household sector, while the household sector demands and purchases those goods and services.

5. Say's Law: According to Say's Law, the act of supplying goods and services creates income for the businesses. This income, in turn, provides the means for individuals in the household sector to demand and purchase those goods and services. In other words, the supply of goods and services generates the income necessary to create the demand for those goods and services.

6. Expanding Population and Economic Growth: An expanding population can lead to economic growth based on Say's Law. When the population grows, the demand for goods and services is likely to increase. To satisfy this demand, businesses increase their supply, resulting in economic growth. As businesses expand their production to meet the growing demand, they generate additional income and create employment opportunities. This, in turn, leads to further increases in demand as more people have income to spend, fueling economic growth.

In summary, Say's Law suggests that supply creates its own demand by emphasizing how the act of supplying goods and services generates income, which then enables individuals to demand and purchase those goods and services. An expanding population can contribute to economic growth by increasing the demand for goods and services, which prompts businesses to expand their supply and generate more income in the process.