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SHORT-RUN AGGREGATE SUPPLY: The total (or aggregate) real production of final goods and services available in the domestic economy at a range of price levels, during a period of time in which some prices, especially wages, are rigid, inflexible, or otherwise in the process of adjusting. Short-run aggregate supply (SRAS) is one of two aggregate supply alternatives, distinguished by the degree of price flexibility; the other is long-run aggregate supply. Short-run aggregate supply is combined with aggregate demand in the short-run aggregate market analysis used to analyze business-cycle instability, unemployment, inflation, government stabilization policies, and related macroeconomic topics.

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EFFICIENT:

The state of resource allocation that exists when the highest level of consumer satisfaction is achieved from available resources. This state can be accomplished through markets when the price buyers are willing and able to pay for a good--based on the satisfaction obtained--is equal to the price sellers need to charge for a good--based on the opportunity cost of production.
An efficient state of resource allocation means that society is doing the best it can to address the scarcity problem. Available resources are used to achieve the greatest possible satisfaction of wants and needs. The scarcity problem is not eliminated with this state, merely lessened to the greatest possible degree.

Efficient Markets

A market exchange achieves an efficient state if the demand price reflects the satisfaction everyone obtains from consuming the good and the supply price reflects all opportunity cost of producing the good, that is, the satisfaction foregone.

Market equilibrium, with equality between demand price and supply price, means the satisfaction obtained from the good is equal to the opportunity cost of production. The value (satisfaction) of the good produced is the same as the value (satisfaction) of other goods not produced. Satisfaction cannot be increased by producing more of one good and less of another.

Inefficient

An inefficient state occurs if the highest level of consumer satisfaction is not achieved from available resources. A market exchange achieves an inefficient state if the demand price does not reflect the satisfaction everyone obtains from consuming the good and/or the supply price does not reflect all opportunity cost of producing the good.

Under these circumstances, a market equilibrium equality between demand price and supply price does not achieve an efficient equality between the value (satisfaction) of the good produced and the value (satisfaction) of other goods foregone. Satisfaction can be increased by producing more of one good and less of another.

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EFFICIENT, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2024. [Accessed: March 4, 2024].


Check Out These Related Terms...

     | inefficient | technical efficiency | economic efficiency |


Or For A Little Background...

     | scarcity | efficiency | opportunity cost | resource allocation | satisfaction | value |


And For Further Study...

     | economic goals | three questions of allocation | fourth rule of competition | free enterprise | opportunity cost | competitive market |


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