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What Are the Key Differences Between Short-Run and Long-Run Aggregate Supply?

When we look at the differences between short-run and long-run aggregate supply, it helps to break it down simply.

1. Time Frame:

  • Short-Run: In this period, prices and wages can be slow to change. They don’t adjust right away when the economy changes.
  • Long-Run: In the long run, we assume that all prices and wages can change fully. This makes the economy more flexible.

2. Output Determinants:

  • Short-Run: The amount of goods produced can change based on how much people want to buy. Businesses can produce more without needing to change their buildings or equipment.
  • Long-Run: The amount produced depends on resources, technology, and how productive the workers are. This is all about the economy's full potential.

3. Curve Shapes:

  • Short-Run Aggregate Supply (SRAS): This curve slopes upward. This means that when prices go up, businesses can produce more.
  • Long-Run Aggregate Supply (LRAS): This curve is vertical. It shows that in the long run, the total amount produced is fixed when the economy is fully employed.

Understanding these differences helps us see how economies respond in different situations!

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What Are the Key Differences Between Short-Run and Long-Run Aggregate Supply?

When we look at the differences between short-run and long-run aggregate supply, it helps to break it down simply.

1. Time Frame:

  • Short-Run: In this period, prices and wages can be slow to change. They don’t adjust right away when the economy changes.
  • Long-Run: In the long run, we assume that all prices and wages can change fully. This makes the economy more flexible.

2. Output Determinants:

  • Short-Run: The amount of goods produced can change based on how much people want to buy. Businesses can produce more without needing to change their buildings or equipment.
  • Long-Run: The amount produced depends on resources, technology, and how productive the workers are. This is all about the economy's full potential.

3. Curve Shapes:

  • Short-Run Aggregate Supply (SRAS): This curve slopes upward. This means that when prices go up, businesses can produce more.
  • Long-Run Aggregate Supply (LRAS): This curve is vertical. It shows that in the long run, the total amount produced is fixed when the economy is fully employed.

Understanding these differences helps us see how economies respond in different situations!

Related articles