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What do you mean by aggregate demand ? Distinguish between market demand and aggregate demand.

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The total demand of goods and Services in an economy is termed as ‘aggregate demand ‘ which is expressed in terms of total expenditure made in the economy thus aggregate demand in an Services.

In other words, aggregate demand refers to total expenditure that the residents of a country are ready to incur on the purchase of goods and Services oat given level of income.

Aggregate Demand = Consumption Expenditure + Investment Expenditure

AD = C + I

Difference between ‘market Demand and ‘ Aggregate Demand’

(i) Market demand refers to the demand of goods in the Market but aggregate demand refers to the total demand of goods and Services in the economy.

(ii) Market demand is a ‘ micro concept while aggregate demand is a ‘ macro concept.

(iii) Market demand curve is negatively sloped which shows the inverse relationship between price and demand while aggregate demand curve is positively sloped which establishes positive relationship between income and demand.

Give attention on fig. market Demand curve

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