| Abstract | In this paper, we put forward the hypothesis of “limited demand” to explain the economic growth. In the classical macroeconomic models, the consumption goods are generally considered to be the composite final goods, and the demands for such goods are unlimited. But in reality, the demand for a specific commodity is usually limited. We find that under the assumption of “limited demand”, the model economy can better explain the phenomena of “growth stagnation in the postmodern economy” . There are two situations in which limited demand is formed. The first is the subjective satiation of the demand, and the second is the passive limited demand due to the wealth constraint. The research on the saturated economy under limited demand shows that technological progress promotes endogenous economic growth, but also leads to income distribution differences. Excessive income distribution differences will lead to the decline of labor participation rate and the labor contribution rate, and the innovation rate will also decline. As a result, the technological progress and output rate will decline, resulting in the potential long-term economic fluctuations, and lead to a continuous decline in the driving force of growth. The ways to promote economic growth are to improve the demand continuously (improve the quality of products and services, invest new products, expand the external market), optimize the structure of social wealth distribution, and increase the disposable income of the common people. |