Say's law: How does real income grow?

This depends on whose perspective you are drawing the graphs for.

From the perspective of the tailor, clothes in units should be on the horizontal axis (quantity of clothes supplied), and bread in units should be on the vertical axis (price of the clothes supplied in terms of bread).

Because of diminishing marginal utility, the supply curve (from the tailor) should be upward sloping, while the demand curve (from the baker) should be downward sloping.

From the perspective of the baker, the roles are reversed, so the quantity is bread and the price is clothes.

There should be a total of six graphs for all possible permutations of clothes, bread, and meat.


For a more detailed explanation, refer to this thread for the barter example (direct exchange):

[url]The Demand Curve]

I would also recommend you read the first few chapters of Man, Economy, and State by Murray Rothbard.