Aggregate Demand Price

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Aggregate Demand Price

Aggregate Demand (AD) refers to demand for all the final goods and services produced in a year. It is expressed in terms of the amount of money that consumers, investors, government and foreign sector desire or intend to spend on all the goods and services. In fact, aggregate demand is actually called aggregate demand price, which means what all the spending units in a country are prepared to pay for the total output produced.

In other words, the aggregate demand price refers to the intended aggregate expenditure (AE) for different for different levels of output or GDP. As such, the term aggregate demand is different from the term demand as used in microeconomic analysis. Demand, in the micro sense refers to that amount of a particular commodity which buyers are prepared to purchase at a particular price. Aggregate demand, on the other hand , is not the demand for a particular commodity, or the demand for the products of an individual firm or industry.

In refer to the demand for output of the economy as a whole, i.e., the demand for all the goods and services taken together at their prevailing prices.

Aggregate demand schedule or aggregate expenditure schedule, or a table in which the total intended expenditure by all the spending groups, viz., consumers, business enterprises, government and rest of the world taken together at various levels of output or GDP produced. As a greater volume of output or GDP is produced for sale by all the producers taken together the intended expenditure by the buyers as a whole on the purchase of this larger output can be expected to be larger. Similarly GDP. In other words, aggregate demand (total intended expenditure by the buyers as a whole) is more at higher level of GDP and less at lower level of GDP. When we arrange the aggregate demand corresponding to various levels of GDP in the form of table it is called Aggregate demand schedule.


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