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Aggregate Demand and Supply

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About This MicroSim

This MicroSim presents the Aggregate Demand and Aggregate Supply (AD-AS) model, the most widely used framework for analyzing macroeconomic events. Students can apply economic shocks such as a consumer confidence boost, oil price shock, government stimulus, technology improvement, or pandemic lockdown and watch the AD, SRAS, and LRAS curves shift in real time with smooth animation. The equilibrium point moves to show how each shock affects both the price level and real GDP output, helping students understand concepts like stagflation, demand-pull inflation, and economic growth.

How to Use

  1. Select a Scenario: Use the dropdown menu at the top of the control area to choose an economic shock (e.g., "Oil price shock" or "Government stimulus").
  2. Set the Magnitude: Adjust the magnitude slider to Small, Medium, or Large to control how big the shock is.
  3. Apply the Shock: Click "Apply Shock" to see the relevant curves shift and the equilibrium point move. An outcome panel appears describing what happens to GDP, prices, and employment.
  4. Stack Multiple Shocks: Apply additional shocks without resetting to see how combined effects interact. For example, apply both a government stimulus and an oil price shock.
  5. Reset: Click "Reset" to return all curves to their original positions and clear the outcome text.

Iframe Embed Code

You can add this MicroSim to any web page by adding this to your HTML:

<iframe src="https://dmccreary.github.io/economics-course/sims/ad-as-model/main.html"
        height="512px"
        width="100%"
        scrolling="no"></iframe>

Lesson Plan

Grade Level

9-12 (High School Economics)

Duration

10-15 minutes

Prerequisites

  • Understanding of supply and demand at the individual market level
  • Knowledge of GDP and the price level as macroeconomic concepts
  • Familiarity with the business cycle and economic shocks

Activities

  1. Exploration (5 min): Apply each of the five scenarios one at a time (resetting between each). Record which curves shift and in which direction. Note whether GDP and prices go up, down, or both change.
  2. Guided Practice (5 min): Apply the "Oil price shock" scenario at Medium magnitude. Read the outcome text about stagflation. Then apply a "Government stimulus" on top of it. Discuss whether the stimulus fixes the problem or creates new issues (hint: prices may rise further).
  3. Assessment (5 min): A country experiences a technology improvement followed by a pandemic lockdown. Predict what happens to AD, SRAS, and LRAS for each event. Use the sim to test your predictions and write a paragraph explaining the combined effect on GDP and prices.

Assessment

  • Students can identify which curve (AD, SRAS, or LRAS) shifts in response to a given economic event
  • Students can predict the direction of change in GDP and price level when a curve shifts
  • Students can explain the concept of stagflation using the AD-AS model and a real-world example

References

  1. AD-AS Model - Wikipedia - Overview of the Aggregate Demand-Aggregate Supply framework and its use in macroeconomics.
  2. Aggregate Demand and Aggregate Supply - Khan Academy - Lessons on AD-AS curves, shifts, and equilibrium.
  3. Stagflation - Wikipedia - Historical context on the 1970s stagflation that the AD-AS model helps explain.