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Why Does the Aggregate Demand Curve Slope Downward

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Why does the aggregate demand curve slope downward?


Definitions:

Absorption Costing

An accounting method that includes all of the manufacturing costs in the cost of a product, including direct labor, materials, and overhead.

Variable Costing

A costing method that includes only variable manufacturing costs—direct materials, direct labor, and variable manufacturing overhead—in unit product costs.

Income Statement

A financial statement that shows a company's revenues and expenses over a specific period, resulting in a profit or loss.

Variable Costing

An accounting method that considers only variable costs as product costs and treats fixed costs as period costs that are expensed in the period incurred.

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