Supply and Demand Are Imperfectly Linked

We tend to think of supply and demand as curves that companies neatly fit into and move proportionally. However, post-Keynesianism economics shows that effective demand is a better way to understand how supply and demand works in reality.

For example, supply can be constrained (e.g. by labor to make the product) and excess demand spills over elsewhere (e.g. maybe they buy something else). Similarly, when demand is in deficit (i.e. less than supply) it causes companies to lay people off resulting in unemployment which decreases demand in other markets.

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