Effective demand is characterized by:

Effective demand refers to the actual demand for a product or service that is backed by the ability to pay for it. This means that it is not enough for consumers to simply desire a good; they must also have the financial resources to purchase it. In this context, effective demand is characterized by demand that is supported by the necessary purchasing power.

Purchasing power reflects the monetary capacity of consumers to buy goods and services at prevailing prices. Therefore, effective demand occurs when consumers not only want a good but can also afford it, resulting in a willingness to pay that drives market transactions. This concept differentiates effective demand from mere desire, which does not take into account the financial ability to make a purchase.

In terms of the other response options, they either blur the line between mere desire and effective demand or mischaracterize the nature of demand in relation to income and pricing. Understanding effective demand is crucial for analyzing market behaviors, consumer choices, and overall economic dynamics.