2.3.1 - characteristics of AS

Question 1

What is aggregate supply (AS)?

Answer 1

The total volume of g/s domestic firms are willing and able to supply at a given price level.

Question 2

Why is the AS curve upward sloping?

Answer 2

Firms are willing to supply more at higher prices.

Question 3

What causes a movement along the AS curve?

Answer 3

A change in price levels, maybe due to a shift in AD, causes a contraction/expansion in AS.

Question 4

What causes a shift in the AS curve?

Answer 4

Shift in AS is caused by a range of factors, depending on whether this is the long-run or short-run curve.

Question 5

What is the relationship between long and short run?

Answer 5

Short run is when at least one FOP is fixed. Short run AS = money wage rates, factor prices, state of technology are all fixed. In the long run, all FOPs are variable.