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Aggregate Supply in Economics: Key Points

• Aggregate supply (AS) is the total supply of goods and services that firms in a national economy plan on selling in a specific time period.
• The amount of aggregate output supplied might rise as the price level P rises, i.e., why the AS curve is upward sloping.
• There are generally three alternative degrees of price-level responsiveness of aggregate supply: Perfectly inelastic, relatively inelastic, and relatively elastic.
• Real output (Y) is plotted on the horizontal axis, and the price level (P) on the vertical axis in the standard aggregate supply-aggregate demand model.
• In the United Kingdom, aggregate supply data is published in the Office for National Statistics' Input–output supply and use tables.
• Aggregate supply is targeted by government "supply-side policies," which are intended to increase productive efficiency and hence national output.
• Examples of supply-side policies include education and training, research and development, supporting small/medium enterprises, reducing business taxes, and investment in infrastructure.
• Continuing "supply-side reforms" were proposed by Liz Truss and Chancellor Kwasi Kwarteng as part of their 2022 economic programme.
• Within the UK government, HM Treasury's work on "the supply side" is led by the Enterprise and Growth Unit, working in conjunction with other government departments and public bodies.
• "Supply-side pessimism" reflects a concern that productive capacity is lost when unused (e.g. during a recession), so the economy loses the ability to recover aggregate supply when demand recovers.
• Spencer Dale, a British economist, took a pessimistic view of supply-side capabilities during the recession of 2012.
• Bill Martin reported on productivity pessimism in 2012, noting that there was an established debate about whether there had been a permanent loss of productive capacity.