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Economics/Shifting a individual firm's curve and the aggregate curve



I am studying macro economics and i was hoping someone could help me anwer this.

When the term "aggregate curve" is used, it means for the entire economy as opposed to an individual firm right?

If yes, will the same factors that cause an individual firm's curve to shift (e.g demand or supply of labor) also cause the aggregate curve to shift (if applied to the whole economy and not just an individual firm)?

Yup!  To understand the relationship between demand and aggregate demand, let's look at cement.  When you look at cement from far away, it looks like a single homogeneous mass, but when you get close to it, you can see that it is really made up of a variety of rocks and sand and silicates of different sizes and shapes.  In the same manner, aggregate demand is made up of all these different sizes and shapes and types of demand curves.  So, when demand increases through, say, a population increase, then it does impact the individual demand curves of many firms, but that then translates to an increase in aggregate demand.

Hopefully that helps!


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Michael Taillard


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Consulting with major corporations, government agencies, political organizations, small businesses, non-profits, start-ups, and even individual people. Teaching at universities around the world, and developing original coursework. Performing original research and analysis. Writing books and scientific studies.

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