Aggregate Supply (AS)

Aggregate supply is that amount of money income received by the entrepreneur through the sale of produced goods at the given level of employment. The minimum expected money incomes arising from the sale of output resulting from a given amount of employment is called aggregate supply of that output. A schedule of the minimum amounts of incomes required to induce entrepreneurs to give varying amounts of employment is called the aggregate supply schedule or the aggregate supply function. Aggregate supply curve is also upward sloping from left to right. This curve shows that if more income is earned from the output with the employment of more labors. It means that employment level increases with the increase in aggregate supply in an economy. Aggregate supply function can also be shown in table and figure below:

Aggregate Supply Schedule

Level of Employment (N) (in lakhs) Aggregate supply (AS) (Rs. in crores)
20 210
25 230
30 240
35 260
40 270
40 290
40 300

The above table shows that the aggregate supply rises with the increase in the level of employment.

The aggregate supply carve (AS) has been shown with the help of aggregate supply schedule given above. The aggregate supply function is an increasing function of the level of employment and it is expressed as AS=f(N). Aggregate supply curve is sloping upward to the right. It means that aggregate supply increases with increase in level of employment. But, when the economy reaches, the level of full employment, the ‘AS’ curves becomes vertical.

 

69 thoughts on “Aggregate Supply (AS)”

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