Aggregate Demand Price

Aggregate Demand Price

Aggregate demand price is the total amount of money the entrepreneurs as a whole do really expect to receive from the sale of output produced by a given volume of labour employment. This otherwise means the amount of money that will be spent to purchase the output produced by employing a given volume of labour. In a two-sector economy consisting of household and business, aggregate demand consists of consumption demand and investment demand. Previously aggregate demand was considered as a ‘global quantity.’ The assumption underlying such a theory is that ‘all income is spendable and is spent. The assumption underlying such a theory is that ‘all income is spendable and is spent. The division of aggregate demand into consumption and investment demand is a break with such a tradition. This division clarified the determinants of aggregate demand and was successful in explaining the fluctuations in aggregate employment, output and income.