Eastport Economy — AD-AS Model
This AD-AS example gives Eastport a compact macroeconomic model. Aggregate demand slopes down because lower price levels are associated with greater real expenditure in the model. Short-run aggregate supply slopes up because output can increase as prices and production incentives change in the short run. The vertical potential-output marker distinguishes sustainable capacity from the current equilibrium. The graph is useful for discussing demand shocks, supply shocks and inflationary or recessionary gaps. It deliberately simplifies a real economy: it does not estimate Eastport's actual GDP, inflation rate or policy response. Those require data, assumptions and a stated time period and a source.
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Scenario
A city economics class is comparing output and the price level around potential output.
Key decisions
- Demand curve: represent planned spending.
- Supply curve: show short-run rising costs.
- Potential output: mark the productive-capacity reference.
When to reuse this
Use this graph for high-level short-run macroeconomic explanations.
Frequently asked questions
What does AD represent?
What does SRAS represent?
Why mark potential output?
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