Aggregate Demand and Supply

Aggregate Demand is the total amount of demand in an economy. In the same way, Aggregate Supply is the total amount of supply in an economy. These are simply found by adding up all the demand/supply.

Short Run Aggregate Supply
SRAS shows total planned output when prices are variable but the productivity of factor inputs (e.g. wage rates) and technology are constant. The curve is assumed to be upward sloping.

SRAS is mainly affected by a change in business costs, such as:
 * Changes in labour costs
 * Raw material costs
 * Commodity prices
 * Taxation or susidies
 * Exchange rates (if using imports)
 * The price of imports

Long Run Aggregate Supply
LRAS shows total planned output when all factors are variable. The curve is assumed ot be vertical.

LRAS is mainly affected by changes that affect the natural level of growth of output, such as:
 * Government supply-side policies (education etc)
 * Size of the labour supply
 * Quality of the labour supply
 * Mobility of the labour supply
 * Capital stock
 * Business efficiency
 * Invention and innovation