The determinants of aggregate supply (AS) in economics are classified into short-run aggregate supply (SRAS) and long-run aggregate supply (LRAS) factors. These elements influence the total output that firms in an economy are willing and able to produce at different price levels.
SRAS determinants focus on short-term shifts caused by variations in production costs, including:
- Changes in wage rates
- Fluctuations in raw material prices
- Exchange rate movements affecting import costs
- Adjustments in indirect taxes or subsidies
LRAS determinants affect the economy’s potential output in the long run by enhancing productive capacity, such as:
- Technological progress and innovation
- Improvements in labour productivity
- Investments in education and skills development
- Changes in government regulations impacting efficiency