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Explain why the SAS (short-run aggregate supply) curve slopes upward and the LAS (long-run aggregate supply)...

Explain why the SAS (short-run aggregate supply) curve slopes upward and the LAS (long-run aggregate supply) curve is vertical

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Answer #1

Short run aggregate supply curve is upward sloping because when the price rises then producer of the product want to sell more so that he can earn more profi so as the price rises the quantity supplies also increases.

According to the sticky price theory the short run aggregate supply curve is upward sloping because the price of some goods are slow to adjust to changes in the overall price level.

Long run aggregate supply is vertical because the long run output is not related to the price level and do not affect the potential gdp because potential gdp is depends upon the labour force, technology and capital stock.

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