Increase in aggregate demand graph

The typical supply and demand graph consists of intersecting supply and demand curves. The equilibrium point is established at that intersection. That point is connected to the vertical price axis and horizontal quantity axis by axis-equilibrium connectors. They mark the price and quantity values represented by the equilibrium point. There are occasions in which the aggregate supply or aggregate demand curves move in response to non-price determinants. If there is an increase in aggregate income for example, the aggregate demand curve will shift to the right indicating an increase in total demand due the increased propensity to consume. Once the new AD curve has moved to the right thus establishing a new equilibrium point on the aggregate supply curve, new price and quantity connector lines must be drawn to connect the new equilibrium point to the vertical price line and the horizontal quantity line. In this case, the price-connector line is drawn from the new equilibrium point to a point that higher on the vertical price axis. The quantity-connector line is drawn from the new equilibrium point to the horizontal quantity axis further to the right indicating a higher quantity.

 

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