Aggregate supply is the total amount of goods and services that all the firms in an economy are willing to produce at each overall price level. It is the economy-wide version of a single firm's supply curve — the whole country's output rather than one product like coffee. Whether higher prices actually draw out more output, though, depends entirely on the time horizon you are looking at.

In the short run, aggregate supply (SRAS) slopes upward. Some costs — especially wages — are sticky and slow to adjust, so when the price level rises, firms' selling prices climb faster than their costs, profit margins widen, and they expand production. In the long run, aggregate supply (LRAS) is vertical at potential output ($Y^*$) — the full-employment level of output determined by an economy's labor, capital, and technology. Once wages and all other prices have fully adjusted, the price level no longer affects how much the economy can produce. SRAS shifts when input costs or productivity change; LRAS shifts only when the economy's real resources or technology change.