FORUM 14.docx - Based on the video presentation, explain...

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Based on the video presentation, explain the difference between the AS-AD Model and thetraditional supply and demand model in economics.Aggregate supply and demand refer to the macroeconomic level or the economy as awhole. It refers to putting everything together like putting all the demand and supply in aneconomy. In a AS-AD model determine not just the quantity but the actual production ofgoods and services in the economy in a particular period of time. Aside from determiningthe actual production it also identifying that actual price level in general. Specifically, inaggregate supply we measure the totality of all the supply of various goods and servicesinside the economy in a particular period of time. It is also the quantity of goods thatdifferent business enterprise plans to sell at a certain price level. It is basically therelationship of the price levels of goods ands services. In the short-run, changes can occurin aggregate supply as it can experience increase and decrease in demand. On the otherhand, aggregate demand is used in economy to measure the total quantity of demand for allthe goods and services that are finished and produced in an economy. It also consistsentirely the goods for consumers, factories and equipment, the import and export and thespending that are made by the government. The purpose of the aggregate supply andaggregate demand model is to provide an illustration in regard the determination of nationalincome of a country and to know the various changes in the price level that are happeningin the market. It can also be useful to determine the phases of cycles in the businessindustry and how could it influence the two macroeconomic indicators such as inflation andreal GDP.On the other hand, traditional supply and demand model merely focuses on themicroeconomic perspective of the quantity and price of a particular goods and services inthe market. When we say particular, we refer to a particular good that are present in themarket such as goods in the market like chicken, pork or beef. We measure the demandand supply based on one particular product to know the increase or decrease in price. Inthis model we focus on a certain product and industry but not on the economy as whole. Wecan say here that if the goods are in the higher prices, consumers will demand less of it andif the prices are higher the businesses will supply more of it to take advantage and earnmore. In this model we are identifying the actual market prices and quantity of goods that
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Term
Spring
Professor
Mrs. Villain
Tags
Economics, Macroeconomics, Supply And Demand, Law of Supply and Demand, traditional supply

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