• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

The aggregate demand depends on various variables, here referring to components of aggregate demand. The two main concepts that describe changes in the aggregate demand are expenditure and output.

Extracts from this document...


Data Response Question, page 178 Define the following: * Aggregate demand: Aggregate demand can be simply defined as the total demand of goods and services in the economy at a given price and fixed time period. In other words, it is the sum of expenditure components. * Disposable income: The income left to an individual after taxes have been cut off, and the rest can be used to spend of luxuries. * Durable goods: goods that are used by consumers over a long period of time. * Investment: addition of capital stock to the economy. Use a diagram to explain the change in the components of aggregate demand The aggregate demand depends on various variables, here referring to components of aggregate demand. ...read more.


This article talks about how taxes have affected growth and how businesses are reluctant to invest. This text refers to two main concepts of investment; they are changes in the level of national income and business confidence. It has been clearly stated that household wages and salaries climbed by 0.8% in the third quarter.....disposable incomes rose by only 0.2%. As national income rises, consumption rises. In this case, every business needs to invest to meet the demand of consumers. In short, national income is directly proportional to investment. However, here the disposable income has only rose by 0.2%. This certainly means that consumption wouldn't grow heavily, but only by a bit. ...read more.


Investment has slightly changed in this text: business investment rose by a tiny 0.3%. This leads to a slight increase in aggregate demand, see below! This is a rough representation of how a change in investment would result in a shift of the AD curve. In this case, AD1 represents the current demand (no figure) and AD2 represents a shift to the right which means there is an increase in the aggregate demand due to an increase in investment by 0.3%(not shown) It is clear that if any of the components of aggregate demand increases by little, then aggregate demand either shifts by a little or not at all. In this case study, aggregate demand has fallen due to other factors (not focused) ?? ?? ?? ?? Rahul Ganji Economics ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our International Baccalaureate Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related International Baccalaureate Economics essays


    However, on the flip side, this might not happen as the USA has done little to check its demand for imports of crude oil. It has steadfastly rejected higher gasoline taxes to curb demand for crude oil and strengthen demand for fuel efficient vehicles.

  2. Econ IA-Supply and Demand

    Mr Dimasi is concerned actions taken by the companies could hurt consumers. "It's people who have an established pattern of behaviour who know pretty much how the others will respond," he said. "Through the high visibility of prices through this website - and they could do it through other activities

  1. The Economics of Housing. Factors affecting prices and demand.

    Because it takes time to build houses. So demand effects more than supply in short run Long run supply 1) Availability of planning is limited in rural areas. 2) Opportunity cost for builders have more profit then any other investment. 3) The houses in UK especially in London are built long time before.

  2. Economics HL Demand of Housing

    Halifax measure, we suspect that they will be prone to relapses over the coming months and we very much doubt that a sharp, sustainable upward trend in house prices is in the process of developing," said Howard Archer, economist at IHS Global Insight.

  1. Supply and Demand - Applying the Theory

    The New Zealand dollar appreciation contributes to shifting the supply curve to the left. The New Zealand dollar appreciation causes the country's "earnings from milk sold abroad to decline when converted back to local currency," meaning that at the same price in the export market, producers are now willing to produce less.

  2. Discuss the various factors that cause poverty.

    This is because of the huge population within China in particular. The huge population causes a higher demand for productivity, which is fuelled by a larger workforce subject to reasonable wages. The more citizens looking for work, the more the government has to provide job opportunities and more access to wage distribution.

  1. Identify the components of Aggregate Demand. Explain the impact on an economy of ...

    This means that goods and services are transferred into the economy for the consumption and amusement of the population. This causes a leakage from the circular flow of income and spending, because money flows out of the economy to purchase the commodities and services.

  2. 15 Historical Economic Questions on Mercatilism and the Development of European Countries.

    The invisible hand theory that Adam Smith advocates implies that markets function in self-regulating manners through human decision-making and rationality. Rationality is also considered to be the same thing as sanity, when a person is irrational they are therefore insane.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work