Definition
Long-run aggregate supply (LRAS) is the relationship between total output and the price level once an economy has had enough time for all wages and prices to fully adjust. It is drawn as a vertical line, because in the long run output is determined by real factors, not by the price level.
Those real factors are the supply of labor, the stock of physical and human capital, available natural resources, and the level of technology. Together they fix an economy's potential output, the sustainable level of production when resources are used at normal rates.
Why it matters
How it works
In the short run, sticky wages and prices let demand shifts move output away from potential. Over time, wages and prices catch up, and the economy returns to the vertical LRAS line. A demand-driven boom that pushes output above potential ends in higher prices rather than permanently higher production.
To shift LRAS rightward an economy must expand its productive capacity: invest in physical capital, build skills, adopt better technology, or grow its workforce. This is the supply side of long-run growth.