Aggregate supply
Aggregate supply describes the total output of goods and services that producers in an economy are willing and able to supply at different general price levels over a period. Short-run output depends on costs, demand conditions and spare capacity, while long-run productive potential depends on resources, technology and productivity. An adverse input-cost shock can restrict supply and put upward pressure on prices; an improvement in productivity can expand productive capacity.
Worked example
A widespread increase in energy costs makes production more expensive. Businesses may reduce output at a given selling-price level and seek higher prices. This is a supply-side shock, even if household spending has not initially changed.
Common mistake
An economy-wide supply curve is not simply one firm’s supply curve enlarged. State whether the analysis concerns the short run or long-run capacity.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | BT | Direct | September 2026–June 2027 |
| FIA | FBT | Direct | September 2026–June 2027 |