Question

How is the classical concept of aggregate supply different from the Keynesian concept of aggregate supply ?

Answer 1

In classical concept :

•  aggregate supply is perfectly inelastic to prices 
•  As curve is a vertical straight line at equilibrium level of output.

• Any change in the prices has no impact on the AS curve. 
• AS is constant at the full employment level regardless of price level. 

In Keynesian concept :

•  AS is perfectly elastic with respect to price level.
• AS curve in a horizontal straight line up to equilibrium level of output. 
• After the equilibrium point the AS curve becomes perfectly in-elastic