Aggregate supply Flashcards
What is aggregate supply?
The total supply of goods/services produced within an economy at a given price level at a given time.
Give a reason why the AS supply curve is sloping upwards?
firms will need to increase their short term costs in order to increase their short term output
What do firms need to do to increase output?
pay for staff to work overtime,
Give another reason why the AS curve slopes upwards?
It represents the supply of all goods/services produced by individual firms within an economy
How is a shift in AS caused?
Shifts in aggregate supply are caused by changes in the conditions of the supply in the macro-economy
How is a movement in AS caused?
movements in Aggregate supply which are caused by shifts in aggregate demand
Why is a movement along the AS needed?
a movement along the aggregate supply curve is needed in order for a state of equilibrium to be achieved
What does a shift in the short run AS show?
Shifts in short run AS show the effects of changes in the costs of production on the economy in the short run
What does a shift in the long run AS show?
long run AS deals with the long term impact on the productive capacity of the economy
What can cause an increase in LRAS?
an increase in the quantity or quality of the factors of production
What is the difference between the short run and the long run?
In the short run at least one of the factors of production is fixed, whereas in the long run all factors of production are variable
What will happen to the SRAS if the costs of production for firms increase?
Left shift
What will happen to the SRAS if the costs of production for firms decrease?
Right shift
What are the factors that can affect the short run AS?
Changes in costs of raw materials
Changes in exchange rates
Change in tax rates
How does an increase in costs of raw materials affect the SRAS?
An increase in the costs of raw materials and energy will increase the costs of production for firms within the economy. This will shift SRAS to the left.
