Short-run aggregate supply curve
A curve that shows the relationship in the short run between the price level and the quantity of real GDP supplied by firms.
The short-run aggregate supply curve represents the level of output that firms are willing and able to produce at a given price level in the short-term. It is derived from the individual supply curves of the various firms in an economy.
In the short-run, the aggregate supply curve is upward sloping, indicating that as the price level increases, firms are willing to supply more output. This is because in the short-run, firms can increase their output by increasing the utilization of existing resources, such as labor and capital. However, beyond a certain level of output, firms may face diminishing returns, which limits their ability to further increase output at the same price level.
Other factors that can affect the short-run aggregate supply curve include changes in production costs, such as wages or raw material prices, changes in productivity, and changes in taxes or subsidies.
It is important to note that the short-run aggregate supply curve represents a temporary relationship between the price level and output level. In the long-run, the aggregate supply curve is vertical, as the economy reaches its full potential output level, given its available resources and technology.
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