Demand theory is an economic theory that concerns the relationship between the demand for goods and their prices; it forms the core of microeconomics. By plotting the quantities that an individual would purchase at different prices, a demand curve can be drawn. Summing the demand curves of individuals will yield a market demand curve, while summing the demands for all goods will in turn give an aggregate demand curve for an economy. In this way, a macroeconomic model can be built up from microeconomic data. Research Demand Theory
A macroeconomic model is a model of a country's economy that is based on macroeconomic theory and econometric analysis. These models make use of past data on such variables as output, employment, and consumption to forecast future values. In Britain, many such models are constructed by various groups of economists; the most influential is the model constructed by the Treasury. However, the quality and usefulness of the forecasts so obtained are still widely debated. Research Macroeconomic Model
Microfoundations are a basis for a macroeconomic model in which economic events are controlled by the rational utility-maximizing behaviour of individuals. It was realized in the late 1960s that traditional macroeconomic models, such as the ISLM model, had no such basis; much of macroeconomics since then has therefore focused on establishing these foundations. This has polarized the debate between monetarists and Keynesians of the 1950s and 1960s much more sharply. On the one hand, traditional monetarists emphasize the market clearing assumption, Pareto optimality, and rational expectations as a basis of analysis, while traditional Keynesians now emphasize the possibility of market failures. Research Microfoundations
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Research Demand Theory
