What is short-run aggregate supply (SRAS)?

Short-run aggregate supply (SRAS) refers to the total production that firms are willing and able to supply at different price levels in the short term, assuming some factors of production are fixed, such as capital and technology. In the short run, businesses can change the quantity of labor and raw materials to respond to changes in demand, which allows for responsiveness to price shifts. This assists in managing fluctuations in the economy without immediate changes to long-term production capacity.

The key distinction is that, in the short run, firms can increase output by employing more labor and materials without a proportional increase in capital. This means that the SRAS curve usually slopes upward, reflecting that as the price level increases, firms are incentivized to produce more goods and services, as higher prices can lead to higher profits on those additional outputs.

The other options do not accurately describe the concept of SRAS. The long-term production capability of the economy is related to long-run aggregate supply (LRAS), while the total demand for goods and services aligns with aggregate demand rather than supply. Lastly, while unemployment may influence production, particularly in the short run, it is not the defining feature of SRAS itself. Therefore, the understanding of SRAS revolves around the immediate response of production to