Introduction
Aggregate Supply (AS) represents the total quantity of goods and services that firms in an economy are willing and able to produce at different price levels. The AS curve depicts the relationship between the overall price level and the quantity of output supplied. It is important to distinguish between Short-Run Aggregate Supply (SRAS) and Long-Run Aggregate Supply (LRAS). SRAS refers to the quantity of output that can be produced in the short run, assuming that some input prices, such as wages, are fixed. In contrast, LRAS represents the maximum sustainable output that an economy can produce when all factors of production are fully employed. This essay will explore the factors influencing AS in both the short and long run, highlighting the key distinctions between these two perspectives.

Factors Influencing Short-Run Aggregate Supply (SRAS)
Costs of Production: The most significant factor influencing SRAS in the short run is the cost of production. When input prices, such as wages, raw materials, and energy, increase, firms face higher costs, leading them to produce less output at any given price level. For example, a rise in oil prices increases the cost of transportation for businesses, reducing their ability to supply goods at the same price level, shifting SRAS to the left. Conversely, a decrease in input prices can lead to a shift in SRAS to the right, as firms can supply more output at the same price.
Government Regulations: Government policies, including taxes, subsidies, and regulations, also impact SRAS. Increased taxes on businesses, such as corporate income tax, can reduce their profits and incentive to produce, leading to a leftward shift in SRAS. Conversely, subsidies can reduce production costs and encourage firms to increase output, shifting SRAS to the right.
Supply Shocks: Unexpected events, known as supply shocks, can disrupt production and significantly affect SRAS. Natural disasters like earthquakes or floods can damage infrastructure and disrupt supply chains, leading to a decrease in output and a leftward shift in SRAS. Geopolitical events, such as wars or trade disputes, can disrupt global supply chains and raise the cost of imports, creating similar effects.

Factors Influencing Long-Run Aggregate Supply (LRAS)
Quantity and Quality of Factors of Production: The long-run aggregate supply is determined by the economy's productive capacity, which is influenced by the quantity and quality of factors of production. These factors include:

⭐Labor Force: A larger and more skilled labor force can lead to higher output levels, shifting LRAS to the right. Education, training, and immigration policies can influence both the size and skill level of the workforce.
⭐Capital Stock: An increase in the capital stock, such as machinery, equipment, and infrastructure, enhances productivity and shifts LRAS to the right. Investment in capital goods, supported by government policies and private sector investment, plays a crucial role in economic growth.
⭐Technological Advancements: Technological progress, such as innovations in production methods and the development of new products, can increase efficiency and output, expanding LRAS.

Institutional Factors: Long-term economic growth and LRAS are also influenced by various institutional factors:

⭐Infrastructure: Well-developed transportation networks, communication systems, and energy infrastructure can promote productivity and reduce production costs, shifting LRAS to the right.
⭐Legal Framework: A stable and predictable legal system, including strong property rights, contract enforcement, and a transparent regulatory environment, encourages investment and innovation, enhancing LRAS.
⭐Political Stability: A stable political environment with clear and consistent policies creates confidence for businesses and investors, promoting investment and economic growth, leading to a rightward shift in LRAS.


Relationship Between Short-Run and Long-Run Aggregate Supply
In the short run, SRAS can deviate from LRAS due to factors like sticky wages and prices. Sticky prices refer to the slow adjustment of prices to changes in supply and demand conditions. For example, wages may be slow to adjust downwards in response to a decrease in demand, leading to a temporary decrease in SRAS. However, in the long run, as prices and wages fully adjust, the economy returns to its potential output level, represented by LRAS.

Conclusion
The factors influencing aggregate supply are complex and multifaceted, encompassing both short-run and long-run perspectives. In the short run, SRAS is primarily determined by costs of production, government regulations, and supply shocks. LRAS is influenced by the quantity and quality of factors of production and a range of institutional factors that affect long-term economic growth. Understanding the distinction between short-run and long-run aggregate supply is crucial for policymakers to design effective economic policies that promote sustainable growth and address economic fluctuations.

Sources:

Mankiw, N. Gregory. Principles of Economics. Cengage Learning, 2014.
McConnell, Campbell R., et al. Economics. McGraw-Hill Education, 2018.