LRAS (Long-Run Aggregate Supply)
Plain definition
The vertical curve showing that in the long run, the economy produces its potential (full-employment) level of real GDP regardless of the overall price level.
In economics
LRAS is vertical at potential GDP because, over time, wages and prices fully adjust, so changes in the price level leave real output unchanged. LRAS shifts right when an economy gains more workers, capital, better technology, or stronger institutions, which is the mechanism behind long-run economic growth.
Example
A breakthrough in battery technology makes energy storage far cheaper. Factories become more productive at every price level, so potential GDP rises and the LRAS curve shifts right, raising long-run output without requiring higher prices.
LRAS is confused with the SRAS curve, which slopes upward and moves with input-price shocks. LRAS never shifts because of price-level changes or demand; only real supply-side factors (resources, technology, institutions) move it. Demand stimulus shifts AD along a vertical LRAS, changing only the price level in the long run.