In
macroeconomics
Macroeconomics (from the Greek prefix ''makro-'' meaning "large" + ''economics'') is a branch of economics dealing with performance, structure, behavior, and decision-making of an economy as a whole.
For example, using interest rates, taxes, and ...
, aggregate demand (AD) or domestic final demand (DFD) is the total demand for final goods and services in an economy at a given time. It is often called
effective demand
In economics, effective demand (ED) in a market is the demand for a product or service which occurs when purchasers are constrained in a different market. It contrasts with notional demand, which is the demand that occurs when purchasers are not ...
, though at other times this term is distinguished. This is the demand for the
gross domestic product
Gross domestic product (GDP) is a money, monetary Measurement in economics, measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjec ...
of a country. It specifies the amount of goods and services that will be purchased at all possible price levels. Consumer spending, investment, corporate and government expenditure, and net exports make up the aggregate demand.
The aggregate demand curve is plotted with
real output on the horizontal axis and the
price level
The general price level is a hypothetical measure of overall prices for some set of goods and services (the consumer basket), in an economy or monetary union during a given interval (generally one day), normalized relative to some base set. ...
on the vertical axis. While it is theorized to be downward sloping, the
Sonnenschein–Mantel–Debreu results show that the slope of the curve cannot be mathematically derived from assumptions about individual rational behavior.
Instead, the downward sloping aggregate demand curve is derived with the help of three macroeconomic assumptions about the functioning of markets:
Pigou's wealth effect,
Keynes' interest rate effect and the
Mundell–Fleming exchange-rate effect. The Pigou effect states that a higher price level implies lower
real
Real may refer to:
Currencies
* Brazilian real (R$)
* Central American Republic real
* Mexican real
* Portuguese real
* Spanish real
* Spanish colonial real
Music Albums
* ''Real'' (L'Arc-en-Ciel album) (2000)
* ''Real'' (Bright album) (2010)
...
wealth and therefore lower
consumption
Consumption may refer to:
*Resource consumption
*Tuberculosis, an infectious disease, historically
* Consumption (ecology), receipt of energy by consuming other organisms
* Consumption (economics), the purchasing of newly produced goods for curren ...
spending, giving a lower quantity of goods demanded in the aggregate. The Keynes effect states that a higher price level implies a lower real
money supply
In macroeconomics, the money supply (or money stock) refers to the total volume of currency held by the public at a particular point in time. There are several ways to define "money", but standard measures usually include Circulation (curren ...
and therefore higher
interest rate
An interest rate is the amount of interest due per period, as a proportion of the amount lent, deposited, or borrowed (called the principal sum). The total interest on an amount lent or borrowed depends on the principal sum, the interest rate, th ...
s resulting from
financial market
A financial market is a market in which people trade financial securities and derivatives at low transaction costs. Some of the securities include stocks and bonds, raw materials and precious metals, which are known in the financial markets ...
equilibrium, in turn resulting in lower
investment spending In macroeconomics, investment "consists of the additions to the nation's capital stock of buildings, equipment, software, and inventories during a year" or, alternatively, investment spending — "spending on productive physical capital such as mach ...
on new
physical capital
Physical capital represents in economics one of the three primary factors of production. Physical capital is the apparatus used to produce a good and services. Physical capital represents the tangible man-made goods that help and support the produc ...
and hence a lower quantity of goods being demanded in the aggregate.
The Mundell–Fleming exchange-rate effect is an extension of the
IS–LM model
IS–LM model, or Hicks–Hansen model, is a two-dimensional macroeconomic tool that shows the relationship between interest rates and assets market (also known as real output in goods and services market plus money market). The intersection of ...
. Whereas the traditional IS-LM Model deals with a closed economy, Mundell–Fleming describes a small open economy. The Mundell–Fleming model portrays the short-run relationship between an economy's nominal exchange rate, interest rate, and output (in contrast to the closed-economy IS–LM model, which focuses only on the relationship between the interest rate and output).
The aggregate demand curve illustrates the relationship between two factors: the quantity of output that is demanded and the aggregate price level. Aggregate demand is expressed contingent upon a fixed level of the
nominal
Nominal may refer to:
Linguistics and grammar
* Nominal (linguistics), one of the parts of speech
* Nominal, the adjectival form of "noun", as in "nominal agreement" (= "noun agreement")
* Nominal sentence, a sentence without a finite verb
* Nou ...
money supply. There are many factors that can shift the AD curve. Rightward shifts result from increases in the
money supply
In macroeconomics, the money supply (or money stock) refers to the total volume of currency held by the public at a particular point in time. There are several ways to define "money", but standard measures usually include Circulation (curren ...
, in
government expenditure
Public expenditure is spending made by the government of a country on collective needs and wants, such as pension, provisions, security, infrastructure, etc. Until the 19th century, public expenditure was limited as laissez faire philosophies be ...
, or in autonomous components of
investment
Investment is the dedication of money to purchase of an asset to attain an increase in value over a period of time. Investment requires a sacrifice of some present asset, such as time, money, or effort.
In finance, the purpose of investing i ...
or
consumption
Consumption may refer to:
*Resource consumption
*Tuberculosis, an infectious disease, historically
* Consumption (ecology), receipt of energy by consuming other organisms
* Consumption (economics), the purchasing of newly produced goods for curren ...
spending, or from decreases in
tax
A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization in order to fund government spending and various public expenditures (regional, local, or n ...
es.
According to the
aggregate demand-aggregate supply model, when aggregate demand increases, there is movement up along the
aggregate supply
In economics, aggregate supply (AS) or domestic final supply (DFS) is the total supply of goods and services that firms in a national economy plan on selling during a specific time period. It is the total amount of goods and services that firms ...
curve, giving a higher level of prices.
[Mankiw, N. Gregory, and William M. Scarth. ''Macroeconomics''. Canadian ed., 4th ed. New York: Worth Publishers, 2011. Print.]
History
John Maynard Keynes in ''
The General Theory of Employment, Interest and Money
''The General Theory of Employment, Interest and Money'' is a book by English economist John Maynard Keynes published in February 1936. It caused a profound shift in economic thought, giving macroeconomics a central place in economic theory and ...
'' argued during the
Great Depression
The Great Depression (19291939) was an economic shock that impacted most countries across the world. It was a period of economic depression that became evident after a major fall in stock prices in the United States. The economic contagio ...
that the loss of output by the private sector as a result of a systemic shock (the
Wall Street Crash of 1929
The Wall Street Crash of 1929, also known as the Great Crash, was a major American stock market crash that occurred in the autumn of 1929. It started in September and ended late in October, when share prices on the New York Stock Exchange colla ...
) ought to be filled by government spending. First, he argued that with a lower ‘effective aggregate demand’, or the total amount of spending in the economy (lowered in the Crash), the private sector could subsist on a permanently reduced level of activity and
involuntary unemployment
Involuntary unemployment occurs when a person is unemployed despite being willing to work at the prevailing wage. It is distinguished from voluntary unemployment, where a person refuses to work because their reservation wage is higher than the prev ...
, unless there were active intervention. Business lost access to capital, so it had dismissed workers. This meant workers had less to spend as consumers, consumers bought less from business, which because of additionally reduced demand, had found the need to dismiss workers. The downward spiral could only be halted and rectified by external action. Second, people with higher incomes have a lower average propensity to consume their incomes. People with lower incomes are inclined to spend their earnings immediately to buy housing, food, transport and so forth, while people with much higher incomes cannot consume everything. They save instead, which means that the
velocity of money
image:M3 Velocity in the US.png, 300px, Similar chart showing the logged velocity (green) of a broader measure of money M3 that covers M2 plus large institutional deposits. The US no longer publishes official M3 measures, so the chart only runs thr ...
, meaning the circulation of income through different hands in the economy, is decreased. This lowered the rate of growth. Spending should therefore target public works programmes on a large enough scale to speed up growth to its previous levels.
Components
An aggregate demand curve is the sum of individual demand curves for different sectors of the economy. The aggregate demand is usually described as a linear sum of four separable demand sources:
:
where
*
is consumption (may also be known as consumer spending), which is given by
where
is consumers' income and
the taxes paid by consumers,
*
is investment,
*
is government spending,
*
is net exports, where
**
is total exports, and
**
total imports, given by
.
These four major parts, which can be stated in either
'nominal' or 'real' terms, are:
* personal consumption expenditures (
) or "consumption", demand by households and unattached individuals; its determination is described by the
consumption function
In economics, the consumption function describes a relationship between consumption and disposable income. The concept is believed to have been introduced into macroeconomics by John Maynard Keynes in 1936, who used it to develop the notion of a ...
. A basic conception is that it is the total consumption expenditures of the domestic economy. The consumption function is
, where
**
is
autonomous consumption
Autonomous consumption (also exogenous consumption) is the consumption expenditure that occurs when income levels are zero. Such consumption is considered autonomous of income only when expenditure on these consumables does not vary with changes i ...
,
the
marginal propensity to consume
In economics, the marginal propensity to consume (MPC) is a metric that quantifies induced consumption, the concept that the increase in personal consumer spending (consumption) occurs with an increase in disposable income (income after taxes and t ...
, and
the disposable income.
*
gross private domestic
investment
Investment is the dedication of money to purchase of an asset to attain an increase in value over a period of time. Investment requires a sacrifice of some present asset, such as time, money, or effort.
In finance, the purpose of investing i ...
(
), such as spending by business firms on
factory
A factory, manufacturing plant or a production plant is an industrial facility, often a complex consisting of several buildings filled with machinery, where workers manufacture items or operate machines which process each item into another. T ...
construction. This is conceived as all
private sector
The private sector is the part of the economy, sometimes referred to as the citizen sector, which is owned by private groups, usually as a means of establishment for profit or non profit, rather than being owned by the government.
Employment
The ...
spending aimed at the production of some future
consumable
Consumables (also known as consumable goods, non-durable goods, or soft goods) are goods that are intended to be consumed. People have, for example, always consumed food and water. Consumables are in contrast to durable goods. Disposable products ...
.
** In
Keynesian
Keynesian economics ( ; sometimes Keynesianism, named after British economist John Maynard Keynes) are the various macroeconomic theories and models of how aggregate demand (total spending in the economy) strongly influences economic output and ...
economics, not all of gross private domestic investment counts as part of aggregate demand. Much or most of the investment in inventories can be due to a short-fall in demand (unplanned inventory accumulation or "general over-production"). The Keynesian model forecasts a decrease in national output and income when there is unplanned investment. (Inventory accumulation would correspond to an excess supply of products; in the
National Income and Product Accounts
The national income and product accounts (NIPA) are part of the national accounts of the United States. They are produced by the Bureau of Economic Analysis of the Department of Commerce. They are one of the main sources of data on general econ ...
, it is treated as a purchase by its producer.) Thus, only the ''planned'' or intended or desired part of investment (
) is counted as part of aggregate demand. (So,
does not include the 'investment' in running up or depleting inventory levels.)
** Investment is affected by the output and the
interest rate
An interest rate is the amount of interest due per period, as a proportion of the amount lent, deposited, or borrowed (called the principal sum). The total interest on an amount lent or borrowed depends on the principal sum, the interest rate, th ...
(
). Consequently, we can write it as,
, a function ''I'' which takes total income and interest rate as parameters. Investment has positive relationship with the output and negative relationship with the interest rate. Thus, an increase in the interest rate will cause aggregate demand to decline. Interest costs are part of the cost of borrowing and as they rise, both firms and households will cut back on spending. This shifts the aggregate demand curve to the left. This lowers equilibrium GDP below potential GDP.
* gross
government
A government is the system or group of people governing an organized community, generally a state.
In the case of its broad associative definition, government normally consists of legislature, executive, and judiciary. Government is a ...
investment and consumption expenditures (
), also determined as
, the difference of government expenditures and taxes. An increase in government expenditures or decrease in taxes, therefore leads to an increase in GDP as government expenditures are a component of aggregate demand.
*
net
Net or net may refer to:
Mathematics and physics
* Net (mathematics), a filter-like topological generalization of a sequence
* Net, a linear system of divisors of dimension 2
* Net (polyhedron), an arrangement of polygons that can be folded up ...
exports
An export in international trade is a good produced in one country that is sold into another country or a service provided in one country for a national or resident of another country. The seller of such goods or the service provider is an ...
(
and sometimes (
)), net demand by the rest of the world for the country's output. This contributes to the
current account Current account or Current Account may refer to:
* Current account (balance of payments), a country's balance of trade, net of factor income and cash transfers
* Current account (banking)
A transaction account, also called a checking account, ch ...
.
In sum, for a single country at a given time, aggregate demand (
or
) is given by
.
These macroeconomic variables are constructed from varying types of microeconomic variables from the price of each, so these variables are denominated in (real or nominal)
currency
A currency, "in circulation", from la, currens, -entis, literally meaning "running" or "traversing" is a standardization of money in any form, in use or circulation as a medium of exchange, for example banknotes and coins.
A more general def ...
terms.
Aggregate demand curves
Understanding of the aggregate demand curve depends on whether it is examined based on changes in demand as income changes, or as price change.
Keynesian cross
Aggregate demand-aggregate supply model
Sometimes, especially in textbooks, "aggregate demand" refers to an entire demand curve that ''looks'' like that in a typical
Marshallian supply and demand
In microeconomics, supply and demand is an economic model of price determination in a Market (economics), market. It postulates that, Ceteris paribus, holding all else equal, in a perfect competition, competitive market, the unit price for a ...
diagram.
![AS + AD graph](https://upload.wikimedia.org/wikipedia/commons/2/25/AS_%2B_AD_graph.svg)
Thus, we could refer to an "aggregate quantity demanded" (
in real or inflation-corrected terms) at any given aggregate average price level (such as the
GDP deflator
In economics, the GDP deflator (implicit price deflator) is a measure of the money price of all new, domestically produced, final goods and services in an economy in a year relative to the real value of them. It can be used as a measure of the va ...
),
.
In these diagrams, typically the
rises as the average price level (
) falls, as with the
line in the diagram. The main theoretical reason for this is that if the nominal
money
Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context. The primary functions which distinguish money are as ...
supply (M
s) is constant, a falling
implies that the
real
Real may refer to:
Currencies
* Brazilian real (R$)
* Central American Republic real
* Mexican real
* Portuguese real
* Spanish real
* Spanish colonial real
Music Albums
* ''Real'' (L'Arc-en-Ciel album) (2000)
* ''Real'' (Bright album) (2010)
...
money supply (
)rises, encouraging lower
interest rate
An interest rate is the amount of interest due per period, as a proportion of the amount lent, deposited, or borrowed (called the principal sum). The total interest on an amount lent or borrowed depends on the principal sum, the interest rate, th ...
s and higher spending. This is often called the "
Keynes effect
The Keynes effect is the effect that changes in the price level have upon goods market spending via changes in interest rates. As prices fall, a given nominal money supply will be associated with a larger real money supply, causing interest rates ...
".
Carefully using ideas from the
theory
A theory is a rational type of abstract thinking about a phenomenon, or the results of such thinking. The process of contemplative and rational thinking is often associated with such processes as observational study or research. Theories may be s ...
of
supply and demand
In microeconomics, supply and demand is an economic model of price determination in a Market (economics), market. It postulates that, Ceteris paribus, holding all else equal, in a perfect competition, competitive market, the unit price for a ...
,
aggregate supply
In economics, aggregate supply (AS) or domestic final supply (DFS) is the total supply of goods and services that firms in a national economy plan on selling during a specific time period. It is the total amount of goods and services that firms ...
can help determine the extent to which increases in aggregate demand lead to increases in real
output
Output may refer to:
* The information produced by a computer, see Input/output
* An output state of a system, see state (computer science)
* Output (economics), the amount of goods and services produced
** Gross output in economics, the value of ...
or instead to increases in prices (
inflation
In economics, inflation is an increase in the general price level of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reductio ...
). In the diagram, an increase in any of the components of
(at any given
) shifts the
curve to the right. This increases both the level of real production (
) and the average price level (
).
But different levels of economic activity imply different mixtures of output and price increases. As shown, with very low levels of
real
Real may refer to:
Currencies
* Brazilian real (R$)
* Central American Republic real
* Mexican real
* Portuguese real
* Spanish real
* Spanish colonial real
Music Albums
* ''Real'' (L'Arc-en-Ciel album) (2000)
* ''Real'' (Bright album) (2010)
...
gross domestic product
Gross domestic product (GDP) is a money, monetary Measurement in economics, measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjec ...
and thus large amounts of unemployed resources, most economists of the
Keynesian school suggest that most of the change would be in the form of output and employment increases. As the economy gets close to
potential output
In economics, potential output (also referred to as "natural gross domestic product") refers to the highest level of real gross domestic product (potential output) that can be sustained over the long term. Actual output happens in real life while p ...
(
), we would see more and more price increases rather than output increases as
increases.
Beyond
, this gets more intense, so that price increases dominate. Worse, output levels greater than
cannot be sustained for long. The
is a ''short-term'' relationship here. If the economy persists in operating above potential, the
curve will shift to the left, making the increases in real output transitory.
At low levels of
, the world is more complicated. First, most modern industrial economies experience few if any fall in prices. So the
curve is unlikely to shift down or to the right. Second, when they do suffer price cuts (as in Japan), it can lead to disastrous
deflation
In economics, deflation is a decrease in the general price level of goods and services. Deflation occurs when the inflation rate falls below 0% (a negative inflation rate). Inflation reduces the value of currency over time, but sudden deflation ...
.
Debt
A
post-Keynesian
Post-Keynesian economics is a school of economic thought with its origins in ''The General Theory'' of John Maynard Keynes, with subsequent development influenced to a large degree by Michał Kalecki, Joan Robinson, Nicholas Kaldor, Sidney Wei ...
theory of aggregate demand emphasizes the role of
debt
Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to another party, the creditor. Debt is a deferred payment, or series of payments, which differentiates it from an immediate purchase. The ...
, which it considers a fundamental component of aggregate demand;
Debtwatch No 41, December 2009: 4 Years of Calling the GFC
'' Steve Keen
Steve Keen (born 28 March 1953) is an Australian economist and author. He considers himself a post-Keynesian, criticising neoclassical economics as inconsistent, unscientific and empirically unsupported. The major influences on Keen's thinking ...
, December 1, 2009 the contribution of change in debt to aggregate demand is referred to by some as the . Aggregate demand is ''spending,'' be it on consumption, investment, or other categories. Spending is related to income via:
:Income – Spending = Net Savings
Rearranging this yields:
:Spending = Income – Net Savings = Income + Net Increase in Debt
In words: What you spend is what you earn, plus what you borrow. If you spend $110 and earned $100, then you must have net borrowed $10. Conversely, if you spend $90 and earn $100, then you have net savings of $10, or have reduced debt by $10, for a net change in debt of –$10.
If debt grows or shrinks slowly as a percentage of GDP, its impact on aggregate demand is small. Conversely, if debt is significant, then changes in the dynamics of debt growth can have significant impact on aggregate demand. Change in debt is tied to the ''level'' of debt:
if the overall debt level is 10% of GDP and 1% of loans are not repaid, this impacts GDP by 1% of 10% = 0.1% of GDP, which is statistical noise. Conversely, if the debt level is 300% of GDP and 1% of loans are not repaid, this impacts GDP by 1% of 300% = 3% of GDP, which is significant: a change of this magnitude will generally cause a
recession
In economics, a recession is a business cycle contraction when there is a general decline in economic activity. Recessions generally occur when there is a widespread drop in spending (an adverse demand shock). This may be triggered by various ...
.
Similarly, changes in the repayment rate (debtors paying down their debts) impact aggregate demand in proportion to the level of debt. Thus, as the level of debt in an economy grows, the economy becomes more sensitive to debt dynamics, and credit bubbles are of macroeconomic concern. Since write-offs and savings rates both spike in recessions, both of which result in shrinkage of credit, the resulting drop in aggregate demand can worsen and perpetuate the recession in a
vicious cycle
A vicious circle (or cycle) is a complex chain of events that reinforces itself through a feedback loop, with detrimental results. It is a system with no tendency toward equilibrium (social, economic, ecological, etc.), at least in the short r ...
.
This perspective originates in, and is intimately tied to, the
debt-deflation
Debt deflation is a theory that recessions and depressions are due to the overall level of debt rising in real value because of deflation, causing people to default on their consumer loans and mortgages. Bank assets fall because of the defaults an ...
theory of
Irving Fisher
Irving Fisher (February 27, 1867 – April 29, 1947) was an American economist, statistician, inventor, eugenicist and progressive social campaigner. He was one of the earliest American neoclassical economists, though his later work on debt def ...
, and the notion of a
credit bubble
An economic bubble (also called a speculative bubble or a financial bubble) is a period when current asset prices greatly exceed their intrinsic valuation, being the valuation that the underlying long-term fundamentals justify. Bubbles can be c ...
(credit being the flip side of debt), and has been elaborated in the Post-Keynesian school.
If the overall level of debt is rising each year, then aggregate demand exceeds Income by that amount. However, if the level of debt stops rising and instead starts falling (if "the bubble bursts"), then aggregate demand falls short of income, by the amount of net savings (largely in the form of debt repayment or debt writing off, such as in bankruptcy). This causes a sudden and sustained drop in aggregate demand, and this shock is argued to be the proximate cause of a class of economic crises, properly
financial crises
A financial crisis is any of a broad variety of situations in which some financial assets suddenly lose a large part of their nominal value. In the 19th and early 20th centuries, many financial crises were associated with banking panics, and man ...
. Indeed, a fall in the level of debt is not necessary – even a ''slowing'' in the rate of debt growth causes a drop in aggregate demand (relative to the higher borrowing year). These crises then end when credit starts growing again, either because most or all debts have been repaid or written off, or for other reasons as below.
From the perspective of debt, the Keynesian prescription of government
deficit spending
Within the budgetary process, deficit spending is the amount by which spending exceeds revenue over a particular period of time, also called simply deficit, or budget deficit; the opposite of budget surplus. The term may be applied to the budget ...
in the face of an economic crisis consists of the government net ''dis''-saving (increasing its debt) to compensate for the shortfall in private debt: it replaces private debt with public debt. Other alternatives include seeking to restart the growth of private debt ("reflate the bubble"), or slow or stop its fall; and
debt relief Debt relief or debt cancellation is the partial or total forgiveness of debt, or the slowing or stopping of debt growth, owed by individuals, corporations, or nations.
From antiquity through the 19th century, it refers to domestic debts, in particu ...
, which by lowering or eliminating debt stops credit from contracting (as it cannot fall below zero) and allows debt to either stabilize or grow – this has the further effect of redistributing wealth from creditors (who write off debts) to debtors (whose debts are relieved).
Criticisms
Austrian theorist Henry Hazlitt
Henry Stuart Hazlitt (; November 28, 1894 – July 9, 1993) was an American journalist who wrote about business and economics for such publications as ''The Wall Street Journal'', ''The Nation'', ''The American Mercury'', ''Newsweek'', and '' ...
argued that aggregate demand is "a meaningless concept" in economic analysis.
Friedrich Hayek
Friedrich August von Hayek ( , ; 8 May 189923 March 1992), often referred to by his initials F. A. Hayek, was an Austrian–British economist, legal theorist and philosopher who is best known for his defense of classical liberalism. Haye ...
, another Austrian, wrote that Keynes' study of the aggregate relations in an economy is "fallacious", arguing that recessions are caused by
micro-economic
Microeconomics is a branch of mainstream economics that studies the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms. Microeconomics fo ...
factors.
See also
*
Aggregate supply
In economics, aggregate supply (AS) or domestic final supply (DFS) is the total supply of goods and services that firms in a national economy plan on selling during a specific time period. It is the total amount of goods and services that firms ...
*
Aggregation problem
An ''aggregate'' in economics is a summary measure. It replaces a vector that is composed of many real numbers by a single real number, or a scalar. Consequently there occur various problems that are inherent in the formulations that use aggregate ...
*
Disequilibrium
*
Economic surplus
In mainstream economics, economic surplus, also known as total welfare or total social welfare or Marshallian surplus (after Alfred Marshall), is either of two related quantities:
* Consumer surplus, or consumers' surplus, is the monetary gain ...
*
Effective demand
In economics, effective demand (ED) in a market is the demand for a product or service which occurs when purchasers are constrained in a different market. It contrasts with notional demand, which is the demand that occurs when purchasers are not ...
*
Excess demand
In economics, a shortage or excess demand is a situation in which the demand for a product or service exceeds its supply in a market. It is the opposite of an excess supply (surplus).
Definitions
In a perfect market (one that matches a sim ...
*
Excess demand function In microeconomics, excess demand is a phenomenon where the demand for goods and services exceeds that which the firms can produce.
In microeconomics, an excess demand function is a function expressing excess demand for a product—the excess of ...
*
Excess supply
In economics, an excess supply, economic surplus market surplus or briefly surply is a situation in which the quantity of a good or service supplied is more than the quantity demanded, and the price is above the equilibrium level determined by sup ...
*
Induced demand
In economics, induced demand – related to latent demand and generated demandSchneider, Benjamin (September 6, 2018"CityLab University: Induced Demand"''CityLab'' – is the phenomenon whereby an increase in supply results in a decline ...
*
Reproduction
Reproduction (or procreation or breeding) is the biological process by which new individual organisms – "offspring" – are produced from their "parent" or parents. Reproduction is a fundamental feature of all known life; each individual or ...
*
Scarcity
In economics, scarcity "refers to the basic fact of life that there exists only a finite amount of human and nonhuman resources which the best technical knowledge is capable of using to produce only limited maximum amounts of each economic good. ...
*
Supply and demand
In microeconomics, supply and demand is an economic model of price determination in a Market (economics), market. It postulates that, Ceteris paribus, holding all else equal, in a perfect competition, competitive market, the unit price for a ...
*
Supply shock
A supply shock is an event that suddenly increases or decreases the supply of a commodity or service, or of commodities and services in general. This sudden change affects the equilibrium price of the good or service or the economy's general pri ...
References
External links
* Elmer G. Wiens
Classical & Keynesian AD-AS Model- An on-line, interactive model of the Canadian Economy.
{{Authority control
Demand
Macroeconomic aggregates
Mathematical and quantitative methods (economics)