Aggregate Supply Flashcards
A shift in the aggregate supply curve means…
That the total output that producers are willing and able to supply at a given price level has changed.
AS & short run
May change due to a change in costs of production
Long run & AS
Is determined by the quantity and quality of economic resources. LRAS therefore reflects the productive capacity of the economy.
Shifts in aggregate supply
Changes in costs of production
Changes in the quality of resources
Chands in the quantity of resources
Changes in the cost of production
Costs e.g. Raw materials
Increase in costs shift AS left
Decrease in costs shift AS to the right
Changes in the quality of resources
Improvements in education & training
Advances in technology
Land improved with fertilisers
Changes I the quantity of resources
Increasing immigration
More women entering labour force
Increasing retirement age
Firms purchasing more capital goods
Reducing regulation
Giving grants to small businesses
Quantity of land increases (new oil fields)
Define aggregate supply?
The total amount that producers in an economy are willing and able to supply at a given price level in a given time period.
Macroeconomic equilibrium
A situation where aggregate demand equals aggregate supply and real GDP is not changing.
Macroeconomics equilibrium exists when
AS = AD
