What is aggregate supply?
It is the total output of goods and services produced and supplied in the economy during a given period of time. It is an important element of macroeconomic analysis. Aggregate supply depends on the availability and use of factors of production like natural resources (N), Labour (L), Capital (K), and the state of technology (T).
According to J.M Keynes “Aggregate supply refers to the total quantity of goods and services which can be produced with available factors of production, i.e., land, labour, capital, and organisation”.
Thus aggregate supply = f (N, L, K, T)
N = Natural resources (which is considered to be constant)
L = Stock of Capital (which is considered variable)
K = Supply of labour (which is considered to be constant)
T = State of Technology (which is considered to be constant)