Short-Run Aggregate Supply vs Long-Run Aggregate Supply
Short-Run Aggregate Supply and Long-Run Aggregate Supply are two Aggregate Demand & Supply concepts in AP Economics that students often mix up. In short: short-run aggregate supply is short-run aggregate supply is the total supply of goods and services at different price levels, holding factor costs and resource prices constant. Meanwhile, long-run aggregate supply is long-run aggregate supply is the total supply of goods and services when all factors of production are fully employed. Here is how they compare side by side.
Short-run aggregate supply is the total supply of goods and services at different price levels, holding factor costs and resource prices constant.
In the short run, an increase in the price level leads to an increase in the quantity of goods and services supplied. This is because firms can earn higher profits by producing more when prices are higher. The SRAS curve is upward sloping.
Long-run aggregate supply is the total supply of goods and services when all factors of production are fully employed.
In the long run, an economy's potential output is determined by its factors of production, such as labor, capital, and technology. Changes in the price level do not affect the quantity of goods and services supplied in the long run. The LRAS curve is vertical.