Question

In the case of deficient demand, the demand in the economy is not enough to:

Options

• Employ all factors of production

• Raise prices in the long run

• Keep the level of income unchanged if left to itself

• Exceed the output produced at full employment level

Answer 1

Deficient demand arises when equilibrium output is less than full employment output, which means demand is not enough to employ all factors of production. Some factors therefore remain unemployed at the equilibrium level of income.