Effective demand differs from desire in that effective demand requires:

Correct Answer

C) Purchasing power to back the want

Why this is correct: The governing concept is that effective demand is the combination of desire and the financial ability to fulfill it. The supplied explanation states that markets respond to money, not wishes, and defines effective demand as 'desire plus ability to pay.' Therefore, the correct choice is the one that specifies 'purchasing power to back the want,' which directly matches the definition of ability to pay. Why the other choices are wrong: 'Approval from a mortgage lender' is wrong because financing is a method to obtain purchasing power, but effective demand can exist with cash or other means. 'A written offer to purchase' is wrong because an offer is a formal action that follows from effective demand; the demand itself is the underlying desire and purchasing power. 'Residency in the market area' is wrong because a buyer does not need to live in the area to have the desire and financial ability to purchase property there. Exam tip: Remember the formula: Effective Demand = Desire + Purchasing Power. A 'want' alone is just desire, not effective demand.