AGGREGATE SUPPLY

The total supply of goods and services produced within an economy at a given overall price level
in a given time period.
It is the total amount of goods and services that firms are willing to sell at a given price level in
an economy.
Short run AS
Long run AS
Aggregate Supply Curve
Shows relationship between nation’s overall price level and the quantity of goods and services
produce by that nation’s suppliers
There is a positive relationship between aggregate supply and the price level. Rising prices are
usually signals for businesses to expand production to meet a higher level of aggregate demand.
The curve is upward sloping in the short run and vertical, or close to vertical, in the long run.
Short-Run and Long-Run Macroeconomics Equilibrium:
The equilibrium in the short-run is depicted by the intersection of the Aggregate Demand (AD)
curve and the Short-Run Aggregate Supply (SAS) curve. When either AD or SAS shifts, the
equilibrium point is changed.
Graph 1: Shift to the right of the AD curve will cause the equilibrium output as well as the price
level to increase.