ABSTRACT
Malthus’s concept of effective demand involves not merely the desire to purchase but also the will and the power to purchase. Emphasis on the will to purchase is often lacking in basic textbooks of economics in explanations of effective demand. He was critical of Ricardo’s view that when the power to purchase exists the will to purchase usually follows. He distinguished between the will to purchase and wishful thinking or velleities. He argued that an increase in purchasing power does not necessarily result in an increase in effective demand. The concept of effective supply is just as important as the concept of effective demand; it emphasises the important distinction between a physical supply and a supply that is actually brought to market as an offer in an exchange transaction.
