Start typing, then use the up and down arrows to select an option from the list. # Macroeconomics

Learn the toughest concepts covered in your Macroeconomics class with step-by-step video tutorials and practice problems.

Aggregate Demand and Aggregate Supply Analysis

# AD-AS Model: Equilibrium in the Short Run and Long Run

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Equilibrium in the Long Run 2m
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Alright. So now let's put together everything we've learned about aggregate demand and aggregate supply to find equilibrium in the long run and the short run, so this is what the A. D. A. S. Model is coming to we're looking for the equilibrium amount of GDP and price level in the economy. Okay. So the long run equilibrium is going to be where the aggregate demand, short run aggregate supply and long run aggregate supply all intersect together. Ok, So remember in the market supply curve we were drawing some shape like this, right? We had our our graph and we were looking for a shape that looks like this and this this middle point was our equilibrium right right in the middle of of the X. Of the demand and supply. Well when we're doing the long run equilibrium with the aggregate demand, aggregate supply, we've got three curves we're dealing with here, we've got our aggregate demand are short run aggregate supply and long run aggregate supply. So our curve our our graph is gonna look more like this, we're gonna have the X. From before this is our aggregate demand, aggregate supply and then our long run aggregate supply. So we're gonna have this star shape and we're all three of the mix right there in the middle. Well that is going to be our long run equilibrium. So let's draw that here on the big graph. So our aggregate demand in the long run our our equilibrium in the A. D. A. S. Model. So remember we've got our price level on this side of the graph, the Y axis. we've got a real GDP the amount of production in the economy there on our X axis. So as we saw we had our aggregate demand curve was downward sloping like this and that's aggregate demand. And then we had short run aggregate supply going up like this and then we had our long run aggregate supply. So when we're in long run equilibrium, all three of the curves are going to pass through the same point, just like that and we're going to have our equilibrium right here in the middle. Yeah. And this will be our equally equilibrium price level right here and this will be the equilibrium amount of GDP right here. Okay, so the long run equilibrium is where all three of the curves across each other. Now let's talk about the short run equilibrium in the
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Equilibrium in the Short Run 2m
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