The correct answer is: D. All of the above
Effective demand is the demand for a good or service that is backed by the ability and willingness to pay for it. It is the amount of money that consumers are willing and able to spend on a good or service at a given price.
Effective demand depends on three factors:
- Desire for the commodity. Consumers must desire a good or service in order to demand it. This desire can be based on a variety of factors, such as the good’s or service’s usefulness, its price, or its marketing.
- Means to purchase. Consumers must have the means to purchase a good or service in order to demand it. This means that they must have the money or credit to pay for it.
- Willingness to use those means for that purchase. Even if consumers have the means to purchase a good or service, they may not be willing to use those means for that purchase. This could be because they are saving their money for something else, or because they do not believe that the good or service is worth the price.
If any of these three factors are not present, then there will be no effective demand for the good or service. For example, if consumers do not desire a good or service, then they will not be willing to pay for it, and there will be no effective demand. Similarly, if consumers do not have the means to purchase a good or service, then they will not be able to pay for it, and there will be no effective demand. Finally, even if consumers desire a good or service and have the means to purchase it, they may not be willing to use those means for that purchase, and there will be no effective demand.