Introduction

Aggregate supply and aggregate demand are key economic concepts that build on the previous concepts of supply and demand.

Aggregate supply is the sum of all the individual supply curves for a good or service in the economy. For example, if there are one thousand producers of avocados in an economy, the individual supply curve shows the supply curve for one producer, while the aggregate supply curve shows the supply curve for all one thousand producers in the economy.

Similarly, aggregate demand is the sum of all the individual demand curves in an economy. Using the same example, if there are ten thousand consumers of avocados in an economy, the individual demand curve shows the demand curve for one consumer, while the aggregate demand curve shows the supply curve for all ten thousand consumers in the economy.