2.3.1 The Characteristics Of AS ✅ Flashcards
What is AS (aggregate supply)?
Total value of output in an economy at a given price level and time.
Why does the AS slope upwards?
- As micro econ supply surveys upwards and AS slopes represent all supply in an economy.
- shows the correlation between price level and output. As pl increases firms increase production by incentivising longer hours or hire.
What does the AS supply curve show on average and marginal cost of labour for firms? Why does this not mean av wage will increase
Increases in order to produce more. Due to incentivising more work and harder work (over time pay).
As this wont effect the normal pay the workers are just working harder.
Why might firms prefer more hours of work with current workers or get temps than hiring more?
Would have to commit and potentially sack if sales decrease (bad rep on firm + redundancy costs).
What is the distinction between movement across and a shift of the AS curve?
Movement along is change in price level (shift in AD).
Shift of AS curve depends on if it is SR or LR.
What is the relationship between SR and LR?
Short run is influenced by changes in cost of production or productivity however long run is on the impact on production capacity/ max output.
Short run has one fixed production factor however long run has all production factors variable.
What can cause a shift in LR and SR AS?
SR = supply side shocks (change in production price).
LR = changes in quality or quantity of factors of production.
Can something cause a short run and long run effect give example?
Yes, fall in prices of oil means a change in production cost and incentivise a new level of output.
