Question
In: Economics
How do you distinguish between the concepts of the D and S functions in microeconomics and...
How do you distinguish between the concepts of the D and S functions in microeconomics and the concepts of AD and AS functions in macroeconomics? Why they are different?
Solutions
Expert Solution
Demand is the desire of a buyer for
a particular commodity at a specific price. Supply is the quantity
of a commodity that producers are willing to give to consumers at a
certain price.
But in macroeconomics AD and AS is a curve that represents the
aggregates demand and supply of any commodity.
In case of demand there is an inverse relationship between the
price of that commodity and demand but in case of supply when price
increases it will increase supply.
In AD curve it is drawn in the IS-LM model at different potential
price and AS curve reflects the labor market and also draw in the
IS-LM model.
Demand depends on consumer choice their supply depends on firms
choice.
But the AD curve shows the combinations of the price level and
output at that point goods and assets markets are simultaneously in
equilibrium. AS for controls the labor market.
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