4.3.6—Aggregate Supply

Aggregate supply (AS) is the total real output firms are willing and able to produce at different average price levels over a period, given production conditions.

The supply side includes wages, input prices, productivity, technology, taxes, infrastructure and the available labour and capital. Distinguish a movement along AS from a shift of AS.

A rise in firms’ costs can reduce real output supplied at each price level, while productivity improvement can increase it.

AS is not the sum of one firm’s short-run supply curve without considering the economy-wide price level and costs.