Which of the following is a difference between aggregate demand and the demand for a single product when price changes?
A) The wealth effect applies to demand for a single product but cannot affect aggregate demand because it includes all products.
B) The wealth effect applies to aggregate demand but not to demand for a single product because the purchasing power of money has no impact on individual product purchases.
C) The substitution effect applies to demand for a single product but cannot affect aggregate demand because aggregate demand includes all products.
D) The substitution effect applies to aggregate demand but not to demand for a single product because there is nothing to substitute when there is just one type of product.

Question

Quizplus · Accepted Answer

The substitution effect applies to the demand for a single product because consumers can switch to other products if the price of one product rises. However, it does not affect aggregate demand because aggregate demand encompasses all products, leaving no alternatives to switch to.

Which of the Following Is a Difference Between Aggregate Demand