When moving along a market demand curve, the prices of related goods are assumed to be constant. With an aggregate demand curve,
A) the assumption is meaningless because we are using a market basket for all goods and services.
B) the prices of related goods have an inverse relationship.
C) all goods are assumed to have the same price.
D) the same assumption holds true.

Question

Quizplus · Accepted Answer

An aggregate demand curve represents the total demand for all goods and services in an economy, so the prices of related goods cannot be assumed to be constant because there is no specific set of goods being considered. Therefore, the assumption of constant prices for related goods is meaningless when dealing with an aggregate demand curve.

When Moving Along a Market Demand Curve, the Prices of Related