Equilibrium in the commodity market is attained when the aggregate demand for goods equal the aggregate supply or investment (I) equals savings (S). If aggregate demand in the economy exceeds the aggregate supply or investment exceeds savings (i.e., I >S), the level of output, employment and income will have a tendency to expand. Conversely, if the aggregate demand for goods falls short of the aggregate supply or the investment is less than saving (i.e., I < S), the level of output, employment and income will show a tendency to decline.

According to the classical system, the equilibrium in the commodity market is attuned by the equality between saving and investment through adjustment in the rate of interest as.

In SS is the saving curve and II is the investment curve. Equilibrium in the commodity market is attained at point E, where at Or₀ rate of interest, saving and investment are equal to OM₀.