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Prepared By:- KVS, Delhi Region Prepared By:- KVS, Delhi Region Prepared By:- KVS, Delhi Region AGGREGATE DEMAND AGGREGATE SUPPLY
12

Aggregate demand & aggregate supply

Oct 20, 2014

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Page 1: Aggregate demand & aggregate supply

Prepared By:- KVS, Delhi Region

AGGREGATE DEMAND AGGREGATE SUPPLY

Page 2: Aggregate demand & aggregate supply

Prepared By:- KVS, Delhi Region

Aggregate Demand is the money value of the total demand for goods and services in an economy during a given period (in an accounting year).

Aggregate Supply is the money value of the total output of goods and services available for purchase by an economy during a given period(in an accounting year).

Prepared By:- KVS, Delhi Region

DEFINITION

Page 3: Aggregate demand & aggregate supply

Prepared By:- KVS, Delhi Region

AD= C + I + G + X-MAD Aggregate demandC Private household

consumption expenditure demand

I Private investment expenditure demand

G Government expenditure demand

X-M Net export demand

Components of AD

Page 4: Aggregate demand & aggregate supply

Prepared By:- KVS, Delhi Region

AD schedule is a table showing combined behaviour of C & I corresponding to different level of income in the economy.

AD SCHEDULE

Page 5: Aggregate demand & aggregate supply

Prepared By:- KVS, Delhi Region

Y (Income)

C (consumption

)

I (investmen

t)

AD Even when the income is

zero

0 20 10 30 There is

20 25 10 35 C at 0 income

40 30 10 40 Because some

60 35 10 45 minimum

80 40 10 50 expenditure is

100 45 10 55 essential even

120 50 10 60 when Y is 0

Note: Investment is assumed to be constant = Rs 10 crores

AD SCHEDULE

Page 6: Aggregate demand & aggregate supply

Prepared By:- KVS, Delhi Region

Y=expenditure(AS)

C+I=AD

I

E

AD=C+I

Y(INCOME) X45⁰

Diagrammatic Presentation of AD

Page 7: Aggregate demand & aggregate supply

Prepared By:- KVS, Delhi Region

AS refers to flow of goods and services as planned by the producers during an accounting year .It is identical with the flow of income (Y)during an accounting year .

Since Y=C+S, We may state that AS= C+S

Concept of AS

Page 8: Aggregate demand & aggregate supply

Prepared By:- KVS, Delhi Region

AS = C+S (C&S are the two components of

AS)C = Consumption which is always positive

S = Saving as a component of Y may be negative when the level of income is low.

Components of AS

Page 9: Aggregate demand & aggregate supply

Prepared By:- KVS, Delhi Region

Y (INCOME

)

C (CONSUMPTIO

N )

S (SAVING) Y-C=S

AS (C+S)

0 20 -20 0

20 25 -5 20

40 40 0 40

60 45 15 60

80 50 30 80

100 55 45 100

120 60 60 120

AS Schedule

Page 10: Aggregate demand & aggregate supply

Prepared By:- KVS, Delhi Region

AS(Y)

Y(INCOME)

AS (C+S

)

AS is a 45⁰ line . This is because of the obvious identity between Y on the X-axis and C+S on the Y-axis

Diagrammatic Presentation of AS

Page 11: Aggregate demand & aggregate supply

Prepared By:- KVS, Delhi Region

Define is aggregate demand . Name its components.

What is aggregate supply?What is autonomous consumption?What does an equality of AD & AS

shows?What is private final consumption

expenditure ? State the factors on which it depends upon?

Self Evaluation

Page 12: Aggregate demand & aggregate supply

Prepared By:- KVS, Delhi Region

Mrs. Anita Bhardwaj KV,

Vigyan Vihar

Mrs .Monika Bajaj KV,

Tagore Garden

Mrs. Leena Singh KV, AGCR

Mr. Sri Keshav KV, no.2 Delhi

Cantt

Mrs .Ritu Tanwar KV, AFS

Rajokri

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