Aggregate supply: Difference between revisions

In [[economics]], '''Aggregate Supply''' ('''AS''') or '''Domestic Final Supply''' ('''DFS''') is the total supply of goods and services that firms in a national [[economy]] plan on selling during a specific time period. It is the total amount of goods and services that firms are willing and able to sell at a given price level in an economy.{{Citation needed|date=February 2012}}

# ''[[Short-run aggregate supply]]'' (SRAS) — During the short-run, firms possess one fixed factor of production (usually capital), and some factor input prices are sticky. The quantity of aggregate output supplied is highly sensitive to the price level, as seen in the flat region of the curve in the above diagram.

# ''[[Long-run aggregate supply]]'' (LRAS) — Over the long run, only capital, labour, and technology affect the LRAS in the macroeconomic model because at this point everything in the economy is assumed to be used optimally. In most situations, the LRAS is viewed as static because it shifts the slowest of the three. The LRAS is shown as perfectly vertical, reflecting economists' belief that changes in aggregate demand (AD) have an only temporary change on the economy's total output.

# ''[[Medium run aggregate supply]]'' (MRAS) — As an interim between SRAS and LRAS, the MRAS form slopes upward and reflects when capital, as well as labor usage, can change. More specifically, medium run aggregate supply is like this for three theoretical reasons, namely the Sticky-Wage Theory, the Sticky-Price Theory and the Misperception Theory. The position of the MRAS curve is affected by capital, labour, technology, and wage rate.