What is an aggregated production curve
aggregated supply curve
Total supply curve, macroeconomic supply curve; Concept of macroeconomics. The aggregated supply curve describes the relationship between the price level and the aggregated supply of the companies. The position of the aggregated supply curve in a price-quantity diagram is particularly determined by the factor prices; it therefore reflects the conditions of the factor markets. The aggregated supply curve can be derived analytically via marginal productivity theory or a mark-up price.
(1) After the classical teachingthat of utter Price and wage flexibility the total supply is determined solely by the existing production factors and the available production technology at any point in time. The economy is always in a situation of full employment, i.e. all production factors are fully utilized. In this case, the aggregated supply curve runs vertically (price inelastic).
(2) In the simple IS-LM model of Keynesian teaching (total macroeconomic models of closed economies, demand side) is supported by Price rigidity went out. At a given price level, the providers adapt flexibly to the respective level of demand by varying quantities. In this case, the aggregated supply curve is horizontal.
(3) Between these two extremes lies the case in which suppliers adjust both prices and quantities. The aggregated supply curve shows a positive slope.
The intersection of the aggregated demand curve and aggregated supply curve determines this macroeconomic price and volume equilibrium.
Cf. related key article Macroeconomic total models of closed economies.
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