Aggregate Supply

• Aggregate supply is the total amount that producers are willing and able to supply at a given price level and time period
• Short-run aggregate supply curve is upward sloping due to firms requiring price increases to incentivize production
• Long-run aggregate supply curve is vertical and represents the limits of the economy’s productive capacity

Aggregate supply refers to the total amount of goods and services that producers are willing and able to supply at a given price level and time period. In the short run, the aggregate supply curve is upward sloping because firms aim to maximize profits and require price increases to incentivize production. The long run aggregate supply curve is vertical, representing the economy’s productive potential. Changes in costs of production, such as labor costs, raw material costs, and government policies, can shift the short run aggregate supply curve. The long run aggregate supply curve can shift due to changes in the quality or quantity of factors of production, such as technology, skills, education, and investment in capital. Population growth, aging populations, inward and outward migration can also impact the long run aggregate supply curve. Overall, the long run aggregate supply curve represents the limits of the economy’s productive capacity, and it is desirable for it to shift outward over time.