Aggregate demand greater than aggregate supply

Definition

When total demand for goods and services in an economy surpasses the total supply available, leading to scarcity. This can result in increased prices and production levels.

Analogy

Picture a popular concert with limited tickets available. If there are more people wanting tickets than there are tickets available, it creates a situation where the demand exceeds the supply. As a result, ticket prices may rise, and additional shows might be scheduled to meet the high demand.

Related terms

Scarcity: A condition of limited resources compared to unlimited wants and needs.

Inflation: A sustained increase in the general price level of goods and services in an economy over time.

Expansionary fiscal policy: Government measures aimed at increasing aggregate demand by boosting government spending or reducing taxes.