Final answer:
Aggregate demand is a key concept from the Keynesian perspective which states that firms produce output based on expected consumer demand, affecting their demand for factors of production. It influences a nation's actual economic output (real GDP) and is driven by the goal of maximizing profits.
Step-by-step explanation:
The Concept of Aggregate Demand
The concept in question is known as aggregate demand, which essentially examines the total demand for goods and services in an economy. This concept is integral to the Keynesian perspective, which posits that the production output by firms is based on the anticipation of selling these goods and services. Therefore, the demand for factors of production by firms, including land, labor, capital, and entrepreneurship, is driven by what they project consumers will demand.
In alignment with the Keynesian theory, it's not just the availability of factors of production that determines what a nation's economy can achieve—in terms of potential GDP—but also the real GDP, which reflects the actual goods and services sold. Real GDP, hence, is reliant upon the aggregate demand throughout the economy. Firms are motivated by profits, which are understood as the difference between revenues and costs. With this in mind, a firm will supply more when facing lower production costs, assuming the prices of its goods and services don't change, subsequently leading to higher profits.