How is the long-run aggregate supply (LRAS) represented in economic models?

The long-run aggregate supply (LRAS) is represented as a vertical line in economic models because it illustrates the economy's maximum productive capacity at full employment. This concept is grounded in the idea that, in the long run, the total output of goods and services produced by an economy is determined by factors like technology, resources, and labor productivity, rather than by the price level.

In the long run, any changes in aggregate demand will only influence the price level and not the output, as the economy is considered to operate at its full potential. This means that regardless of the demand for goods and services, the economy can only produce at a certain level in the long term, as indicated by the vertical LRAS. Thus, any shifts in demand can lead to inflation or deflation but will not change the overall output capacity of the economy; this is why the LRAS is depicted as a vertical line.

This understanding distinguishes the long-run perspective from the short-run aggregate supply (SRAS), which can be upward sloping due to price and wage stickiness, allowing for fluctuations in output in response to changes in aggregate demand.