e call these curves Aggregate Supply and Demand (AS and AD) to distinguish them from those used in a Microeconomic supply and demand chart (which would generally be labelled simply S and D). Those curves are shaped similarly, but they depict something different. Micreconomic charts show the quantities and prices of individual goods, with such variables as national income and price levels held constant. By contrast, the Aggregate charts we are considering here show the interaction of total output and price level.

he charts for individual products would probably display the influences of local factors, or trends that are peculiar to the market for a single good. Aggregate curves depict general economic trends in which all those local perturbations average out.

usiness cycles are aggregate phenomena, of course. In fact, our focus in Fundamental Economics is almost completely on the macroeconomic level: we are interested in understanding the basic laws that govern the production and distribution of goods and services in society.