Aggregate supply is the total of all goods and services which are produced in an economy over a given period of time.
It includes everything which firms produce and is therefore mainly affected by the cost of producing (in the short-run) and the ability to produce (in the long-run).
In the short-run, firms are only able to increase their supply by using existing resources more effectively. Long-run increases in supply will be more significant but it takes time to hire more workers, implement new technology and build new infrastructure.
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Subsidy – money which is given by the government to encourage the production of a particular good or service.
Short-run – the period of time where at least one factor of production (Land, Labour, Capital, Enterprise) is fixed. This is usually capital.
Long-run – the period of time where all factors of production are variable (they can change!).