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In economics, a consumer's desire for a good becomes 'effective demand' only when that desire is backed by which two additional elements?
AAbility to pay and willingness to pay for it
BGovernment approval and a fixed market price
CA long waiting period and brand loyalty
DAdvertising support and seasonal availability
Answer & Solution
Correct answer: A. Ability to pay and willingness to pay for it
1. Demand in economics is more than mere desire to buy a good.
2. Effective demand needs three things: desire, the means (ability) to pay, and the willingness to use those means.
3. So the two elements that must back the desire are the ability to pay and the willingness to pay.
4. Hence the correct choice is the one naming both ability and willingness.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 2 Unit I "Law of Demand and Elasticity of Demand", p.2_
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