In economics, effective demand in a market is the demand for a product or service which occurs when purchasers are constrained in a different market. It contrasts with notional demand, which is the demand that occurs when purchasers are not constrained in any other market. In the aggregated market for goods in general, effective demand is the same thing as aggregate demand when the demand for goods is influenced by spillovers from quantity constraints from other markets. The concept of effective supply parallels the concept of effective demand. The concept of effective demand or supply becomes relevant when markets do not continuously maintain equilibrium prices.
Read more about Effective Demand: Examples of Spillovers, History, The Effective Demand Principle
Famous quotes containing the words effective and/or demand:
“Relying on any one disciplinary approach—time-out, negotiation, tough love, the star system—puts the parenting team at risk. Why? Because children adapt to any method very quickly; today’s effective technique becomes tomorrow’s worn dance.”
—Ron Taffel (20th century)
“I often accuse my finest acquaintances of an immense frivolity; for, while there are manners and compliments we do not meet, we do not teach one another the lessons of honesty and sincerity that the brutes do, or of steadiness and solidity that the rocks do. The fault is commonly mutual; however, for we do not habitually demand any more of each other.”
—Henry David Thoreau (1817–1862)