CFA CFA Level 1 Market demand and supply curve vs aggregate demand and supply curve

Market demand and supply curve vs aggregate demand and supply curve

  • This topic has 2 replies, 3 voices, and was last updated Sep-18 by gsignoret.
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    • mkazma
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      what’s the difference between the market demand/supply curve and the aggregate demand/supply curve ?

    • googs1484
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      Well, they could be the same thing but not necessarily. An aggregate curve is simply the sum of the curves of the firm’s being included. If every firm in that specific industry is included then the aggregate sum is the market curve. Make sense?

    • gsignoret
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      Hi! Great question, mkazma! I’m pretty sure that by “aggregate” demand and supply curves you were referring to the macro curves AD and AS. I’m also pretty sure that googs1484 thought you meant industry demand and supply. 
      Industry demand and supply curves are a micro concept and do involve adding up, as googs1484 kindly explains.
      AD and AS are very different creatures and involve no adding up.
      To understand the difference, you need to learn the IS-LM model. Once you’ve understood the concepts of goods market and money market equilibria in that model, you’ll be able to perfectly understand the answer to how AD and AS differ from demand and supply in the micro (individual consumer and firm or industry-level) supply and demand curves sense found here: 
      http://faculty.washington.edu/danby/notes/notes14.html
      Good luck!

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