Aggregate Demand - Formula, Table and Graph

What is Aggregate Demand?

Aggregate Demand is planned expenditure of all sectors at Particular Income Level

Formula of AD

We have already studied that

Aggregate Demand = Private Consumption Exp + Investment Expenditure

AD = C + I

Schedule of Aggregate Demand

It can be made by totaling Consumption and Investment Expenditure

Important Points About AD

1. Even at 0 level of Income, there is AD

due to Autonomous Consumption and Autonomous Investment Expenditure which are applicable at 0 level of income

2. AD increases with Income

With the increase in income, Consumption Investment increases but investment expenditure remains the same

Due to this increase in consumption expenditure, AD increases with income

3. Note all 3 curves do not start from Origin

Consumption Curve starts from Point S (OS Representing Autonomous Consumption Expenditure)

Investment Curve starts from Point R (OR Represents Autonomous Investment Expenditure)

AD Curve starts from Point T (OT Represents total of Autonomous Consumption and Investment Expenditure)

OT = OR + OS

4. Consumption Curve C is Positively Sloping

Increases with Increase in Income

Investment Expenditure is a horizontal line parallel to x axis

It Remains Fixed irrespective of increase in income

Aggregate Demand is combination of Consumption and Investment Curve so it is also positively sloping

NCERT Questions

No questions in this part

Other Books

Question 1

State some important points about Aggregate Demand.