Write short note on Effective Demand.
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In economics, effective demand (ED) in a market is the demand for a product or service which occurs when purchasers are constrained in a different market. ... The concept of effective demand or supply becomes relevant when markets do not continuously maintain equilibrium prices.
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Effective demand refers to the actual demand for a product when the buyers are in a constrained state.
*It depends on the purchasing power of the customers.
* According to Keynes's theory, several factors determine effective demand such as investment expenditures, consumption, income and output.
* It is a state when aggregate demand becomes equivalent to aggregate supply.
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