2. 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
3. Prepared By:-
KVS, Delhi Region
AD = C + I + G + X-M
AD Aggregate demand
C Private household
consumption expenditure demand
I Private investment expenditure
demand
G Government expenditure demand
X-M Net export demand
Components of AD
4. 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
5. Prepared By:-
KVS, Delhi Region
Y
(Income)
C
(consumption)
I
(investment)
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
6. Prepared By:-
KVS, Delhi Region
Y=expenditure(AS)
C+I=AD
I
E
AD=C+I
Y(INCOME) X
45⁰
Diagrammatic
Presentation of AD
7. 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
8. 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
9. Prepared By:-
KVS, Delhi Region
Y
(INCOME)
C
(CONSUMPTION )
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
10. 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
11. 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
