2.3.1 Characteristics of AS

Question 1

What is the aggregate supply?

Answer 1

Aggregate supply is the total supply of goods/services produced within an economy at a specific price level at a given time.

Question 2

Why does the AS curve slop upwards?

Answer 2

/The aggregate supply is the combined supply of all individual supply curves in an economy which are also upward sloping
/As real output increases, firms have to spend more to increase production e.g. wage bills will increase

Question 3

How is SRAS influenced?

Answer 3

Short run aggregate supply (SRAS) is influenced by changes in the costs of production or productivity. Short run refers to the time period where at least one factor of production is fixed.

Question 4

How is LRAS influenced?

Answer 4

Long run aggregate supply (LRAS) is influenced by a change in the productive capacity of the economy. Productive capacity is changed by changes to the quantity or quality of the factors of production. When production capacity changes, it is equivalent to a shift inwards/outwards of the production possibilities frontier (PPF).