why is the long run aggregate supply curve vertical at poten

why is the long run aggregate supply curve vertical at potential real GDP?

a)production costs are at the lowest level possible b)producers profits are increasing at this point c) resources costs adjust fully to price changes d)unemployment equal zero e)there is a very strong relationship between further proce changes and output produced

Solution

The long run aggregate supply curve is vertical at potential real GDP. In the long run there is almost no relation between price and aggregate real output in the economy. A higher price level generates the same level of aggregate real output in the economy. The factors that affect the output are the resource quality like quality of labor, capital, land and entrepreneurship change and resource quantity like labor, capital and land. Once the economy adjusts to these two factors then the supply curve is vertical in the long run and does not shift.