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What is the difference between the long run and short run aggregate supply curves?

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kmbond | Student, Undergraduate | (Level 3) eNoter

Posted November 13, 2010 at 4:10 AM via web

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What is the difference between the long run and short run aggregate supply curves?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted November 13, 2010 at 4:17 AM (Answer #1)

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I'd say that there are two major differences.

The first is that one is short run and the other is long run.  The short run AS curve is based on the assumption that all of the things that determine aggregate supply are being held constant.  In the long run, these determinants of AS are not held constant.

That leads to the second difference, which is the shapes of the curves.  Because all determinants are being held constant, the SRAS curve is sloped -- it is upward sloping.  By contrast, the LRAS curve is vertical.  It is vertical because, in the long run, there is no correlation between price level and the real level of production in the economy.

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