What primarily distinguishes short-run and long-run aggregate supply?

The primary distinction between short-run and long-run aggregate supply lies in the flexibility of prices, production costs, and wages. In the short run, some input prices (particularly wages) are fixed or inflexible, which can lead to variations in output based on demand conditions. Businesses can adjust production levels in response to changes in demand, but they may face constraints due to fixed costs. This results in a positively sloped short-run aggregate supply curve.

In contrast, in the long run, all input prices, including wages, are assumed to be flexible, allowing firms to adjust their production processes fully in response to changes in demand. As a result, the long-run aggregate supply curve is vertical, indicating that the total output is determined by the economy’s resources and technology rather than the price level. This reflects the idea that, over a longer time period, the economy reaches full employment and any increase in overall demand leads primarily to higher prices rather than increased output.

While government intervention, technological research and development, and market competition can influence aggregate supply, they do not specifically address the core difference in the flexibility of input prices and costs that characterizes the short-run versus long-run aggregate supply.