Short-Run Equilibrium
AP Macroeconomics
Where we came from…
Aggregate supply: the quantity
of output that firms are
willing and able to produce
in the economy.
In the long run, the level of
output depends on capital
stock, the labor force, and
the level of technology.
In the short run, the level of
output depends on the
amount of labor employed
with a given level of capital
and technology.
Where are we going?

In this lesson, we’ll focus
on:


Short-run equilibrium
between aggregate supply
and demand
Changes in output and the
price level if aggregate
supply or demand changes
Equilibrium Revisited…in the Short Run…


Short-run
macroeconomic
equilibrium occurs
when real GDP
demanded equals real
GDP supplied.
Equilibrium point on this
graph is Point A (output
level Y)
Visual 3.11, Unit 3 Macroeconomics, National Council on Economic Education,
http://apeconomics.ncee.net
A long-run thang…

In the long-run, you see
the equilibrium occurs
at Point B.
Visual 3.11, Unit 3 Macroeconomics, National Council on Economic Education,
http://apeconomics.ncee.net
But, but, what if…?


What if there is an
increase in aggregate
demand? Then the new
equilibrium is at a higher
price level, and a higher
level of output.
What’s the response?
Firms increase
production. This happens
when demand shifts…not
a change in quantity
demanded!
What is demand
decreases?
Visual 3.11, Unit 3 Macroeconomics, National Council on Economic Education,
http://apeconomics.ncee.net
And now…

Some resources:
http://www.reffonomics.com/textbook2/macroec
onomics2/keynesianthought/keynesiancross.
swf
Works Cited




Economics of Seinfeld. Demand.
http://yadayadayadaecon.com/clip/46/
Krugman, Paul, and Robin Wells. Krugman’s
Economics for AP. New York: Worth
Publishers.
Morton, John S. and Rae Jean B. Goodman.
Advanced Placement Economics: Teacher
Resource Manual. 3rd ed. New York: National
Council on Economic Education, 2003. Print.
Reffonomics. www.reffonomics.com.