As a result, the long-run aggregate supply curve is vertical.įurthermore, the aggregate demand curve is downward sloping (negative slope). Therefore, an increase in price does not affect the profit and quantity supplied. When the price rises, it does not increase profits because wages and other input prices will also increase proportionally. Meanwhile, the long-run supply represents the quantity supplied when wages and other input prices are variable. The short-run aggregate supply curve is upward sloping (positive slope). An increase in price increases the profits of the firms and thus encourages them to increase output. However, wages and other input prices remain constant. Short-run aggregate supply is the quantity supplied when some costs are variable. Macroeconomics distinguishes between short-run and long-run concepts for aggregate supply. The difference between short-run equilibrium and long-run equilibrium
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