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Effective demand is the term economists use to refer to the actual demand that exists in a market. In other words, effective demand exists when a buyer has both the desire and the ability to buy a product. So the effective demand for sports cars might be measured by the actual number of sports cars sold at a certain price during a particular period.
In the Keynesian framework, aggregate demand is the sum of consumption demand, investment demand, government demand for goods and services, plus net exports. Aggregate supply is simply total output -- gross domestic product â the total production of goods and services in the economy. Both aggregate demand and aggregate supply are depicted as curves, with the price level on the vertical axis and income and output on the horizontal axis.