Aggregate supply (AS) refers to the total quantity of real output that firms in an economy are willing to produce and sell at different overall price levels during a given period. Macroeconomists distinguish between short-run
Aggregate demand (AD) is the total planned expenditure on domestically produced final goods and services at different overall price levels during a given period. It consists of household consumption, investment, government purchases, and net exports.
The classical view of aggregate demand and aggregate supply emphasises flexible wages and prices, market adjustment, and the economy’s productive capacity. In the standard long-run classical AD–AS model, real output tends toward potential output, while
Classical and Keynesian economics offer two influential perspectives on how market economies adjust to changes in output, employment, prices, and aggregate demand. The classical tradition places greater emphasis on flexible prices and wages, market adjustment,
Factor markets, also called resource markets, are markets in which firms obtain the productive inputs needed to produce goods and services. These inputs include labor, land and natural resources, physical capital, and entrepreneurial services. Households
The Edgeworth Box is a graphical model used in microeconomics to analyse how a fixed quantity of two goods can be allocated between two consumers. It combines the preferences of both consumers in one diagram
Welfare economics is the branch of economics that evaluates how the allocation of resources affects individual and social well-being. It studies economic efficiency, distribution, market failure, and the welfare consequences of policies such as taxes,
Oligopoly is a market structure in which a small number of large firms account for a substantial share of market sales. Because only a few important competitors operate in the market, each firm’s decisions about
