In the context of the Aggregate Demand and Aggregate Supply (ADAS) model, understanding short-run aggregate supply (SRAS) is crucial for analyzing economic fluctuations. Unlike long-run aggregate supply, which is vertical and determined by factors of production such as labor and capital, short-run aggregate supply is influenced by current price levels. In the short run, the quantity of real Gross Domestic Product (GDP)—which represents the total value of goods and services produced in an economy—is responsive to changes in price levels.

When the price level increases, producers are incentivized to increase their output, leading to a rise in real GDP. Conversely, a decrease in the price level results in reduced production. This relationship mirrors the basic principles of market supply, where higher prices typically encourage greater supply. Therefore, the short-run aggregate supply curve slopes upward, indicating that as the overall price level rises, the quantity of goods and services supplied in the economy also increases.

To visualize this, consider the SRAS curve plotted with the price level on the vertical axis and real GDP on the horizontal axis. At lower price levels, the economy operates at a lower GDP, while higher price levels correspond to higher GDP. This dynamic illustrates the direct correlation between price levels and production output in the short run, highlighting the importance of macroeconomic conditions that influence this relationship.

In summary, the short-run aggregate supply curve reflects how price fluctuations can impact the overall production capacity of an economy, emphasizing the need to consider both price levels and real GDP when analyzing economic performance.