CA Foundation · Business Economics · Theory of Demand and Supply
In Business Economics, demand for a commodity is said to be an effective demand only when the consumer has which combination of features?
Effective demand needs desire for the good, the ability to pay for it and the willingness to spend at a given price in a given period. A mere wish without purchasing power, or purchasing power without any intention to buy, does not amount to demand.
- ADesire for the good, ability to pay and willingness to spend on itCorrect
- BDesire for the good only
- CAbility to pay for the good, even without any wish to buy it
- DNeed for the good, even if the consumer cannot pay
Explanation
Demand in economics requires desire backed by purchasing power and willingness to spend, at a given price and time. Desire alone is just a wish, and ability to pay without willingness does not create demand. Hence the first option is correct.
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