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Markets are made up of sellers and buyers. Sellers have a supply of goods, and buyers have a supply of money. If the price is right, a seller and a buyer agree to make a trade. The amount of buyer interest that exists at a specific price level is called the demand.
Aggregate Demand and Aggregate Supply. â¢The AD-AS model is derived from the IS-LM. model. Â¾The two models are equivalent. Â¾Depending on the particular issue, one model may. prove more useful than the other model. â¢The IS-LM model relates the real interest rate to output. â¢The AD-AS model relates the price level to output.