Aggregate Supply
What is Aggregate Supply?
The total output firms are willing to produce at each overall price level.
Understanding Aggregate Supply
In the short run, aggregate supply (SRAS) slopes upward because some wages and prices adjust slowly: when prices rise, selling more becomes profitable before costs catch up.
In the long run, output is set by the economy's resources and technology, so long-run aggregate supply (LRAS) is vertical at potential output. Supply shocks, such as an oil price spike, shift SRAS and can raise prices while output falls.