Question

This is a graph showing price and total output in the short and long run.

A graph has total economic output on the x-axis, and price on the y-axis. A vertical line represents the supply in the long run, and a line that curves upwards represents the supply in the short run. The lines intersect at a point.

According to this graph, how does supply behave in the short run and long run?

Output remains constant.
Output increases.
Output cannot be predicted.
Output reacts differently.

Answer 1

Short-run and long-run supply behave differently.

- Short run (upward-sloping SRAS): output increases when the price level rises.
- Long run (vertical LRAS): output is fixed at the economy’s full‑employment (natural) level and does not change with price.