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THE LONG AND THE SHORT

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Aggregate Supply is just a fancy way of saying the total output of goods and services a country can produce. Think of it as everything that businesses churn out in an economy. The difference between the short run and the long run in aggregate supply? It’s all about how much can change—and how fast. Essentially, what can be churned out immediately vs. what will take time to churn out. 

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The Long Run Aggregate Supply (LRAS):

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Imagine the long run as the economy's maximum potential output. It’s all the farms 🐮 factories 🏭 and firms 🏢 —basically, the productive capacity of the country. This is stuff that takes time to build: factories don’t pop up overnight, (though maybe one day with 3D printing). The LRAS reflects the total capital stock (think of it like a stack of 🥞 pancakes - only since its capital its the goods used to make other goods) of an economy, and it’s fixed or shown vertically on a the AD/AS model  because you can’t change it quickly. ​

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Short Run Aggregate Supply (SRAS):

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Now let’s zoom in on the short run. Here, we’re looking at what the economy can produce right now by adjusting things that are easier to change. This could mean hiring more workers 👨🏻‍🔧 running factories for an extra shift, or using up raw materials already in stock. Instead of the farms, factories, and firms, this time it's whats in them (the labor, raw materials, and working capital). SRAS is flexible and can be filled or thrown away immediately—need some more paint? 🪣 Just hop on over to your local hardware store and buy however much suits your fancy. Don't need it anymore? Dump it on your neighbor's lawn! (That is a joke - please don't dump paint on your neighbor's lawn). 

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But there’s a catch: in the short run, some things (like wages and prices) don’t adjust quickly. For example, you might be able to ramp up production, but you can’t instantly renegotiate every worker’s salary or change the price of every product. That’s why the short run is more about tweaking what’s already in place, rather than transforming the whole economy.

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It’s About Time (But Not Literal Time!)

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Here’s the kicker: when economists talk about the "short run" or "long run," they don’t mean a specific number of months or years. It’s not like, "Oh, the long run starts in 2027." Instead, it’s about how much can realistically change:

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*The short run is when only some things can adjust (like labor 👷🏽 working capital 🪚 or raw materials 🧱). 

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*The long run is when everything can adjust or has adjusted, even the economy's total productive capacity. 🏭

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Very Short Run and Very Long Run

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AP, IB, and A Level students don't need to know this but it might help your thinking to be aware of the extremes. There’s also the very short run, where nothing can adjust—not even prices. Think of a convenience store where the sticker machine gets stuck and the staff can't change the prices on the milk and chocolate bars until the machine gets fixed. Luckily, the very short run is typically very short (the sticker machine is working again). 

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On the flip side, the very long run is when even the economy’s productive capacity can grow.  New technology gets invented, populations grow, infrastructure improves, and the economy’s potential output expands. Basically you just build a lot more farms, factories and firms! Supply Side economics is all about promoting this. 🚛 🏗️ 🏬 🏗️ 🏭

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In a Nutshell

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Aggregate Supply in Macroeconomics is just like Supply in Microeconomics only this time as the name suggests it's in aggregate - that means total. 

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🏭 LRAS = The long-term potential productive capacity of the economy - the fixed capital. Farms, factories, and firms and all the conveyor belts and cash registers that make it happen —it’s the big stuff that takes time to change. 

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🪚 SRAS = What can be cranked up quickly. Workers, raw materials, and working capital—it’s the flexible stuff.​ It's like all the stuff inside the LRAS - the stuff on the conveyor belts.

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🕓 Time isn’t about the clock—it’s about how much can adjust! 

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