Economy-UPSC notes

Short-Run & Long-Run Macroeconomic Equilibrium | UPSC Notes

Short run, equilibrium happens when:What people want to buy = What businesses want to produce, at the current price level.

Short-Run Macroeconomic Equilibrium & & Long-Run Macroeconomic Equilibrium 🌍 What is Short-Run Macroeconomic Equilibrium? It is a situation where: What people want to buy (Aggregate Demand, or AD) Is equal to what businesses want to produce (Short-Run Aggregate Supply, or SRAS) At the current price level 👉 When this happens, the economy is balanced —no need to increase or decrease prices or production. 🍎 Easy Example (Market for Apples) Imagine a town where: People want to buy 100 apples a day (this is the AD ) Apple farmers can produce exactly 100 apples a day (this is the SRAS ) Apples are being sold at ₹10 per apple (this is the price level ) ✅ At this point: All the apples produced are sold. Buyers are happy (they get the apples they want). Farmers are happy (they sell all their apples at a good price). No one wants to change the price or the number of apples. 🎯 This is short-run macroeconomic equilibrium! 🤔 What if something changes? 🔺 If demand increases: People now want 120 apples , but s…

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