short-run aggregate supply

Suppose every shop in the country suddenly found it could charge higher prices for what it sells. In the short run, would businesses produce more? Often yes — because their costs, especially wages and rents fixed by contracts, don't rise as fast as the prices they can charge. The gap between higher selling prices and slow-to-change costs makes producing extra worthwhile, so firms ramp up. Short-run aggregate supply captures exactly this: how much total output the economy is willing to produce at each price level, over a horizon short enough that some costs are still sticky.

Drawn as a curve, short-run aggregate supply (SRAS) slopes upward: a higher overall price level coaxes out more total output, because with input costs lagging, each sale is more profitable and firms expand production and hiring. The key assumption is stickiness — wages set in contracts, prices printed on menus, and expectations that haven't yet caught up all mean costs cannot adjust instantly. Take that stickiness away and the link breaks; that is precisely why the long-run supply curve looks different.

Short-run aggregate supply is the second half of the AD-AS model and the reason demand changes have real effects on output at all. If costs adjusted instantly, a burst of spending would just raise prices and nothing else; because they don't, extra demand really does pull up production and jobs for a while. The honest caveat is that this is a short-run story: as contracts expire and expectations update, costs catch up, and the boost to real output fades back toward the economy's normal capacity.