Question

Explain how consumers impact aggregate demand and supply in the economy (example).

Answer 1

consumers affect aggregate demand in the economy in the following ways-

1. if the preferences of the consumer changes then aggregate demand will change.

2. if preferences of the consumer remain same but number of the consumer increases then aggregate demand shift outward.

3. if the income of the consumer changes then aggregate demand of the consumer changes.

aggregate supply does not have to do anything with consumer, it depends on prices and exogeneous factors that affects it are factors prices.