we distinguish between the long-run aggregate supply curve and the short-run aggregate supply curve. in the long run
Question
We distinguish between the long-run aggregate supply curve and the short-run aggregate supply curve. In the long run
Solution
In the long run, the aggregate supply curve is vertical. This is because, in the long run, the economy's output is determined by factors such as labor, capital, natural resources, and technology, but not by the price level. This means that changes in the price level do not affect the long-run aggregate supply.
On the other hand, the short-run aggregate supply curve is upward sloping. This is because, in the short run, firms can increase output in response to higher prices, and decrease output in response to lower prices. This is due to the fact that in the short run, some economic variables are fixed, such as capital and technology, while others are variable, such as labor, raw materials, and inventories.
So, in summary, the difference between the long-run and short-run aggregate supply curves lies in the fact that in the long run, output is determined by factors that are not affected by the price level, while in the short run, output can be influenced by changes in the price level.
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