When at a particular price level, aggregate demand for final goods equal aggregate supply of final goods, the final goods or product in market reaches it equilibrium. Aggregate demand for final goods consist of ex-ante consumption, ex-ante investment, government spending etc. The rate of increase in ex-ante consumption due to a unit increase in income is called marginal propensity to consume.

Equilibrium in product market achieved when.

AD= AS

The correct answer is option (1) : AD= AS

AD (Aggregate Demand):This represents the total demand for final goods and services produced in an economy at a given price level.

AS (Aggregate Supply): This represents the total quantity of final goods and services that firms are willing to sell at a given price level.

Equilibrium refers to a state of balance. In the product market, this balance occurs when the total amount of goods and services demanded by consumers (AD) is equal to the total amount of goods and services supplied by firms (AS) at a specific price level.