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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.
According to Keynes, Sayâs Law is not true; that is, supply does not create its own demand. Rather, according to Keynes, supply is capable of outstripping demand, with the result that goods remain unsold, and production and employment are correspondingly cut back.