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AD-AS Model: Equilibrium in the Short Run and Long Run definitions

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  • Aggregate Demand
    A curve showing the total quantity of goods and services demanded across all levels of an economy at various price levels.
  • Short Run Aggregate Supply
    A curve representing the total output firms are willing to produce at different price levels in a period when some input prices are fixed.
  • Long Run Aggregate Supply
    A vertical curve indicating the economy's maximum sustainable output when all resources are fully utilized.
  • Equilibrium Price Level
    The price at which the quantity of goods and services demanded equals the quantity supplied in the economy.
  • Real GDP
    The total value of all final goods and services produced in an economy, adjusted for inflation.
  • Long Run Equilibrium
    A state where aggregate demand, short run aggregate supply, and long run aggregate supply intersect at a single point.
  • Short Run Equilibrium
    A point where aggregate demand and short run aggregate supply intersect, possibly away from long run aggregate supply.
  • Curve Shift
    A movement of an entire curve, such as aggregate demand or supply, due to changes in economic factors.
  • Price Level
    A measure reflecting the average of current prices across the entire spectrum of goods and services produced in the economy.
  • Intersection Point
    The spot on a graph where two or more curves cross, indicating equilibrium conditions.
  • Graph
    A visual representation used to illustrate relationships among aggregate demand, aggregate supply, and equilibrium.
  • X-Axis
    The horizontal line on a graph, typically representing real GDP or output in macroeconomic models.
  • Y-Axis
    The vertical line on a graph, usually indicating the price level in macroeconomic diagrams.
  • Star Shape
    A visual pattern formed on the AD-AS graph when all three curves intersect at a single equilibrium point.