b) Short-run and long-run AS AS

c) the relationship between short-run and long-run AS

in economics

• short-run = the time period where at least one factor of production is fixed

  • short-run aggregate supply = influenced by changes to the cost of production

    • cost of production decreases = short-run aggregate supply increases → short-run aggregate supply curve shifts to the right

    • cost of production increases = short-run aggregate supply decreases → short-run aggregate supply curve shifts to the left

• long-run = the time period where all factors of production are variable

  • long-run aggregate supply = influenced by a change to the production capacity of the economy

  • a change to the production capacity of the economy = a change to the quantity or the quality of the factors of production

    • production capacity of the economy decreases → long-run aggregate supply decreases → long-run aggregate supply curve shifts to the left

    • production capacity of the economy increases → long-run aggregate supply increases → long-run aggregate supply curve shifts to the right

  • a change to the production capacity of the economy = a shift of the production possibility frontier curve

    • production capacity of the economy decreases → maximum productive potential of the economy decreases → production possibility frontier curve shifts inwards

    • production capacity of the economy increases → maximum productive potential of the economy increases → production possibility frontier curve shifts outwards