The Aggregate Supply Function

  • Louise Davidson


John Maynard Keynes wrote The General Theory (1936) in order to show that Say’s Law, where (aggregate) supply created its own (aggregate) demand, was not applicable to a monetary, production economy. In a Say’s Law world, the aggregate demand function would be coincident with the aggregate supply function so that ‘effective demand, instead of having a unique equilibrium value, in an infinite range of values all equally admissible; and the amount of employment is indeterminate except in so far as the marginal disutility of labour sets an upper limit’ (Keynes, 1936, p. 26). In other words, Say’s Law assumes there is no barrier to the economy obtaining, in the long run, a full employment output level.


Marginal Cost Aggregate Demand Supply Function Monopoly Power Aggregate Supply 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Davidson, P. (1962), ‘More on the Aggregate Supply Function’, Economic Journal, (June) (Chapter 31 in this volume).Google Scholar
  2. Davidson, P. and E. Smolensky (1964), Aggregate Supply and Demand Analysis, (New York: Harper & Row).Google Scholar
  3. Hicks, J. R. (1937), ‘Mr Keynes and the Classics’, Econometrica, (January).Google Scholar
  4. Keynes, J. M. (1936), The General Theory of Employment, Interest and Money, (New York: Harcourt).Google Scholar
  5. Keynes, J. M. (1973), The Collected Writings of John Maynard Keynes, XIII, edited by D. Moggridge (London: Macmillan).Google Scholar
  6. Klein, L. R. (1947), The Keynesian Revolution, (New York: Macmillan).Google Scholar
  7. Lerner, A. P. (1934–5), ‘The Concept of Monopoly and the Measurement of Monopoly Power’, The Review of Economic Studies.,Google Scholar
  8. Modigliani, F. (1944), ‘Liquidity Preference and the Theory of Interest and Money’, Econometrica, (January).Google Scholar
  9. Weintraub, S. (1957), ‘The Micro-Foundations of Aggregate Demand and Supply’, Economic Journal, (September).Google Scholar

Copyright information

© Paul Davidson 1990

Authors and Affiliations

  • Louise Davidson

There are no affiliations available

Personalised recommendations