Aggregate Supply (SRAS)
Definition
The aggregate supply curve represents the total quantity of goods and services that firms are willing and able to produce at different price levels in an economy. It shows the relationship between the price level and the real output (GDP) produced by firms.
Analogy
Think of the SRAS curve as a roller coaster track. As prices go up, firms are willing to produce more because they can make higher profits (like when people want to ride a roller coaster when it's popular). As prices go down, firms are less willing to produce because their profits decrease (like when fewer people want to ride a roller coaster).
Related terms
Aggregate Demand (AD): The total quantity of goods and services demanded in an economy at different price levels.
Long-run Aggregate Supply (LRAS): Represents the maximum potential output an economy can produce when all resources are fully utilized.
Sticky Wages: When wages do not adjust quickly to changes in prices or demand, leading to temporary imbalances in labor markets.
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