Short-term aggregate supply (SAS)

Short term aggregate supply is described in an AD-AS model using a SAS curve. A SAS curve is a straight line with a positive slope that describes the relationship between supply and price level when all other factors are held constant.

A SAS curve shows the aggregate supply in the short term, when factor prices are constant, factor prices are adjusted to the current price level of goods and services in the long term but not in the short term. Short-term aggregate supply is the total supply of products in a country in the short term. Short-term aggregate supply depends on the price level in that short-term aggregate supply is higher, the higher prices it is. Aggregate supply is described by a SAS curve with positive slope. The SAS curve has a positive slope because the marginal costs increases with increasing volume and companies are only interested in selling more quantity of products when prices exceed the marginal cost.

Short term aggregate supply (SAS curve) is affected by the number of hours worked in the economy, productivity changes and changes in production factor prices.