##
**
Deficit Demand
**

It refers to a situation where

Aggregate Demands is less than Aggregate Supply

at full employment level

Normally

AD=AS at equilibrium Level

Deficit Demand

AD < AS at equilibrium Level

## Note

Deficit Demand leads to Deflationary gap

Deflationary gap is a situation where

Actual Aggregate Demand is less than Aggregate Supply

at full employment level

##
**
Graph Presentation
**

On X Axis, we represent Income or Output

On Y Axis, we show Demand

It can be seen that

AS Curve is Positively Sloping starting from Origin making an angle of 45 degree with x axis

AD Curve is also starting from Point C

Both AD and AS Curve intersect at Point E which is the equilibrium Point

Now, due to deficit demand AD Curve shifts downwards to AD'

This leads to creation of Deflationary Gap (Represented by EF)

##
**
What is Deflationary Gap?
**

It is the gap between

Aggregate Demand at full employment level

and

Actual Aggregate Demand

##
**
Effect of Deflationary Gap/Deficient Demand
**

It leads to decrease in General Price level in an economy

This is because Aggregate Demand decreases but Aggregate Supply remains constant

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