What is the difference between demand and aggregate demand?

It’s very important to understand the meaning of those two concepts and the difference between them. We could consider demand for apples in for example a small village or a shop, but when we talk about aggregate demand, we mean the TOTAL spending on domestic goods and services.

Those two concepts are similar in meaning, but they differ in scale, when we talk about economics. When we talk about microeconomics we use ‘demand’, which is defined as the quantity of a good that customers are willing and able to purchase at a given price in a given time period, which means that we are talking about one single company or a market. Whereas when we talk about aggregate demand we refer to macroeconomics. Aggregate demand is the total spending on goods and services at a given price in a given time period, so we could consider the whole country.

When it comes to IB exam, there’s also a difference between demand and aggregate demand while drawing diagrams. In diagram representing demand there is quantity at X axis and price at Y axis, whereas for aggregate demand there’s real output at X axis and national income at Y axis. It’s very important to remember this and not lose your points in the exam.

Answered by Kaja K. Economics tutor

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