Page "Effective demand" Paragraph 1

One example involves spillovers from the labor market to the goods market.

If there is labor market disequilibrium such that individuals cannot supply all the labor they want to supply, then the amount that they are able to supply will influence their demand for goods ; the demand for goods, contingent on the constraint on the amount of labor that can be supplied, is their effective demand for goods.

In contrast, if there were no labor market disequilibrium, individuals would simultaneously choose both their quantity of labor to supply and the quantity of goods to purchase, and the latter would be their notional demand for goods.

In this example, the effective demand for goods would be less than the notional demand for goods.