2.3.2 Short-run AS

Question 1

Factors influencing short run AS SRAS

Answer 1

The SRAS curve shifts when there are changes in the conditions of supply. This is usually in the form of costs to businesses:
Changes in costs of raw materials and energy
Changes in exchange rates
Changes in tax rates

Question 2

Changes in costs of raw materials and energy: factors influencing SRAS

Answer 2

The cost of raw materials and energy may change. A rise in their costs would increase costs for businesses and thus decrease SRAS from SRAS1 to SRAS3.

Question 3

Changes in exchange rates: factors influencing SRAS

Answer 3

A stronger currency reduces the price of imports, so imported products will be cheaper. This would reduce business costs. The AS curve would shift outwards, from SRAS1 to SRAS2.

Question 4

Changes in tax rates: factors influencing SRAS

Answer 4

Increased tax rates would increase business costs and therefore decrease SRAS from SRAS1 to SRAS3.

Question 5

Synoptic point **- SRAS

Answer 5

SRAS is determined by the cost of production. If microeconomic changes, such as the price of raw materials or indirect taxes, affect enough businesses, they will have macroeconomic impacts through a change in SRAS.