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:
“Justice in the hands of the powerful is merely a governing system like any other. Why call it justice? Let us rather call it injustice, but of a sly effective order, based entirely on cruel knowledge of the resistance of the weak, their capacity for pain, humiliation and misery. Injustice sustained at the exact degree of necessary tension to turn the cogs of the huge machine-for- the-making-of-rich-men, without bursting the boiler.”
—Georges Bernanos (1888–1948)
“Again and again I am brought up against it, and again and again I resist it: I don’t want to believe it, even though it is almost palpable: the vast majority lack an intellectual conscience; indeed, it often seems to me that to demand such a thing is to be in the most populous cities as solitary as in the desert.”
—Friedrich Nietzsche (1844–1900)