In economics, the short-run is the period when general price level, contractual wages, and expectations do not fully adjust. In contrast, the long-run is the period when the previously mentioned variables adjust fully to the state of the economy.
Aggregate Supply
Aggregate supply is the total amount of goods and services that firms are willing to sell at a given price level.
When capital increases, the aggregate supply curve will shift to the right, prices will drop, and the quantity of the good or service will increase.
Short-run Aggregate Supply
During the short-run, firms possess one fixed factor of production (usually capital). It is possible for the curve to shift outward in the short-run, which results in increased output and real GDP at a given price. In the short-run, there is a positive relationship between the price level and the output . The short-run aggregate supply curve is an upward slope. The short-run is when all production occurs in real time.
Aggregate Supply
This graph shows the relationship between aggregate supply and aggregate demand in the short-run. The curve is upward sloping and shows a positive correlation between the price level and output.
Long-run Aggregate Supply
In the long-run only capital, labor, and technology impact the aggregate supply curve because at this point everything in the economy is assumed to be used optimally. The long-run supply curve is static and shifts the slowest of all three ranges of the supply curve. The long-run curve is perfectly vertical, which reflects economists' belief that changes in aggregate demand only temporarily change an economy's total output. The long-run is a planning and implementation stage.
Moving from Short-run to Long-run
In the short-run, the price level of the economy is sticky or fixed depending on changes in aggregate supply. Also, capital is not fully mobile between sectors.
In the long-run, the price level for the economy is completely flexible in regards to shifts in aggregate supply. There is also full mobility of labor and capital between sectors of the economy.
The aggregate supply moves from short-run to long-run when enough time passes such that no factors are fixed. That state of equilibrium is then compared to the new short-run and long-run equilibrium state if there is a change that disturbs equilibrium.