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In: Business and Management

Submitted By missmeme1201
Words 1981
Pages 8
The AS/AD model consists of three curves. The curve describing the supply side of the aggregate economy in the short run is the short-run aggregate supply ( SAS ) curve, the curve describing the demand side of the economy is the aggregate demand curve, and the curve describing the highest sustainable level of output is the long-run aggregate supply ( LAS ) curve.
The first thing to note about the AS/AD model is that it is fundamentally different from the microeconomic supply/demand model. In microeconomics the price of a single good is on the vertical axis and the quantity of a single good on the horizontal axis. The reasoning for the shapes of the micro supply and demand curves is based on the concepts of substitution and opportunity cost. In the macro AS/AD model, the price level of all goods, not just the price of one good, is on the vertical axis and aggregate output, not a single good, is on the horizontal axis. The shapes of the curves have nothing to do with opportunity cost or substitution.The AS/AD model consists of three curves. The curve describing the supply side of the aggregate economy in the short run is the short-run aggregate supply ( SAS ) curve, the curve describing the demand side of the economy is the aggregate demand curve, and the curve describing the highest sustainable level of output is the long-run aggregate supply ( LAS ) curve.
The first thing to note about the AS/AD model is that it is fundamentally different from the microeconomic supply/demand model. In microeconomics the price of a single good is on the vertical axis and the quantity of a single good on the horizontal axis. The reasoning for the shapes of the micro supply and demand curves is based on the concepts of substitution and opportunity cost. In the macro AS/AD model, the price level of all goods, not just the price of one good, is on the vertical axis…...

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