The long-run aggregate supply curve is determined by the relationship between the supply of the good, the demand for it, and the price level. When the price level is high, the long-run aggregate supply curve is low and vice versa.
This graph of the long-run aggregate supply curve is created by the “natural” (aka “non-skew”) assumption that the supply curve is a constant. (This is the one that most textbooks, like this one, teach).
In short, the supply curve is a “slope”. In other words, it’s the relationship between the demand and the price of the good. At a certain price, the supply curve is flat. The supply curve is flat at a certain price because the price is too high, and the supply curve is flat because the price is too low. In other words, the supply curve is a non-skew.
The non-skew, or horizontal supply curve, is the one that tells us what’s really going on. It is the one that tells us how many units of the good there are, and how much demand in the market. The non-skew is also the one we want because it tells us how long the supply curve is. It is the one that tells us how long the supply curve should be.
This is the part where we need to start looking at the long-run supply curve in more detail. We are trying to model a market economy. We have a lot of data, and we now need to decide what is really going on. A fundamental economic theory teaches us that the market is always price-inelastic, meaning that there will never be any profit from the short-run, and that is why the market goes up and down. What the market does is it pushes prices down.
The supply curve is not the only one we can look at. The key to analysis is to look at the market position from the start.
The position of the long-run aggregate supply curve is the starting point of the long-run aggregate demand curve. If the market is price-inelastic, then the supply curve will be flat and the demand curve will have the same slope as the long-run aggregate demand curve. So we need to look at the long-run aggregate demand curve and see what is happening.
I can’t tell you exactly what is happening with the demand curve because it’s long and it’s not exactly clear what is happening with the supply curve. The short-run aggregate supply curve, the long-run aggregate demand curve, and the short-run aggregate demand curve share the same slope. However, the long-run aggregate supply curve has a slope that is steeper than the short-run aggregate demand curve.
I have no idea what the long-run aggregate demand curve is. It is the same slope as the short-run aggregates demand curve, so if I want to look at the short-run demand curve, I should know what the long-run demand curve is. However, if I don’t know the long-run aggregate demand curve, I don’t know what is happening with the supply curve.
The aggregate demand curve is the amount of money we are currently spending per unit of time. The long-run aggregate supply curve is a measure of how much money we are currently spending per unit of time. That can be thought of as the demand curve. The short-run aggregate supply curve is the amount of money we are currently spending per unit of time in the short run.
