Final answer:
Sticky wages, sticky prices, and misperceptions about relative prices contribute to the downward slope of the aggregate demand curve.
Step-by-step explanation:
In the aggregate demand and aggregate supply model, sticky wages, sticky prices, and misperceptions about relative prices explain why the aggregate demand curve is downward sloping. Sticky wages refer to the idea that wages do not adjust immediately in response to changes in the overall price level. This prevents firms from adjusting their production levels and reduces aggregate demand. Similarly, sticky prices refer to the idea that prices of goods and services do not adjust immediately, leading to a decline in aggregate demand.
Misperceptions about relative prices occur when individuals or firms mistakenly believe that changes in the overall price level reflect changes in the relative prices of goods. This leads to changes in their production and consumption decisions, which also impact aggregate demand.
All three of these effects contribute to the downward slope of the aggregate demand curve, as they result in a decrease in aggregate demand in response to an increase in the price level.