Our text does not introduce the long-run aggregate supply curve until Chapter 11. But it is best to introduce it at the very beginning, so that students can become familiar with the relationship as soon as possible.
P represents the price level, that is, the average of the prices of final goods and services.
The short-run aggregate supply curve, SRAS, slopes upward to the right. In the short-run, that is, during the ups and downs of the business cycle, this is the relevant aggregate supply curve. The long-run aggregate supply curve, LRAS, is vertical at potential output, Y P , which represents the highest sustainable level of output. That is, it represents the productive capacity of the economy. When the economy is at Y P , that is, on the long-run aggregate supply curve, it is also on the production possibilities frontier.