Short Run Equilibrium Output

Short run is referred to as that period in which the firm can try varying its output by bringing about a change in the variable factors of production, which can lead to maximum profit or maximum losses.

In this period the number of firms in the industry are fixed due to the reason that neither the existing firms are able to leave nor any new firm is able to join.

In the short run period, the prices and wages are sticky or in other words, are slow to adjust to equilibrium level thereby creating sustained periods of shortage or surplus and thus prevents the economy from operating, as per its full potential or potential output.

An economy is said to be in short run equilibrium when the level of aggregate output demanded is equal to the level of aggregate output supplied.

In the AD-AS model, the short-run equilibrium output can be found at the point where the Aggregate Demand (AD) intersects the Short-Run Aggregate Supply (SRAS).

This concludes our article on the topic of Short Run Equilibrium Output, which is an important topic in Economics for Commerce students. For more such interesting articles, stay tuned to BYJU’S.