## Quick Reference

The law states that the value of excess demand is zero. The excess demand, *z*_{i}, for good *i* is the difference between demand, *x*_{i}, and the sum of supply from firms, *y*_{i}, and the initial endowment, *ω*_{i}; hence

*z*_{i} = *x*_{i} − *y*_{i} − *ω*_{i}.

Noting that demand and supply are both functions of prices, Walras's law states that for an economy with *n* goodsfor any prices *p*_{i}, *i* = 1,…, *n*. The law implies that in an economy with *n* markets there are only *n −* 1 independent demand–supply equations. Hence, when the general equilibrium for an economy with *n* goods is studied only *n* − 1 markets need to be analysed. If a set of prices can be found that place these *n* − 1 markets in equilibrium then the prices also ensure the *n*th market is in equilibrium.

**From:**
Walras's law
in
A Dictionary of Economics »

*Subjects:*
Economics.