Aggregate supply
Also known as: as curve, total output
Aggregate supply is the total quantity of goods and services that producers in an economy are willing and able to supply at each price level. It is modeled with a short-run curve that slopes upward and a long-run curve that is vertical at full employment.
Aggregate supply (AS) is the economy-wide counterpart to an individual firm's supply curve: it shows the total output of goods and services that all producers are willing to supply at each overall price level. Together with aggregate demand, it forms the core model economists use to explain output, employment, and inflation.
In the short run, the aggregate supply curve slopes upward. Input costs such as wages are "sticky" — set by contracts and slow to adjust — so when the price level rises, firms' selling prices climb faster than their costs and producing more becomes profitable. A supply shock shifts the curve: cheaper energy or improved productivity shifts short-run aggregate supply rightward, while a spike in input costs shifts it leftward, raising prices and cutting output at the same time (stagflation).
In the long run, wages and other input prices fully adjust, so the price level no longer affects real output. The long-run aggregate supply curve is vertical at the economy's full-employment (potential) output, which is determined by real factors: the labor force, capital stock, natural resources, and technology. Economic growth appears as a rightward shift of this vertical curve.
AP Macroeconomics tests aggregate supply heavily — drawing and shifting the SRAS and LRAS curves, finding short-run and long-run equilibrium, and analyzing supply shocks. Business and economics certificates such as the CGMA fundamentals syllabus cover the same model, including how fiscal and monetary policy interact with aggregate supply.
Key takeaways
- Aggregate supply is the total output producers are willing to supply at each price level.
- Short-run aggregate supply slopes upward because wages and other input costs are sticky.
- Long-run aggregate supply is vertical at full-employment output, set by labor, capital, resources, and technology.
- Negative supply shocks shift SRAS left, raising the price level while reducing output.
- AP Macroeconomics and business economics exams test shifting the curves and finding equilibrium.