Type Family fails to reduce without PolyKinds extension

Summary

Sometimes without PolyKinds extension, type family fails to reduce to expected type.

Steps to reproduce

{-# LANGUAGE TypeFamilies #-}
{-# LANGUAGE UnsaturatedTypeFamilies #-}

module Test where
    
type family Id (x :: *) :: * where
    Id a = a

type family Apply (f :: * -> *) (x :: *) :: * where
    Apply f x = f x

foo :: Apply Id String
foo = "foo"

Above code will produce compile error:

Test.hs:13:7: error:
    • Couldn't match type: Apply Id String
                     with: [Char]
      Expected: Apply Id String
        Actual: String
    • In the expression: "foo"
      In an equation for ‘foo’ foo = "foo"
   |
13 | foo = "foo"
   |       ^^^^^

After adding the PolyKinds extension, everything works fine.