AS Flashcards
What does AS show?
Aggregate supply shows the quantity of real GDP which is supplied at
difference price levels in the economy
Why is the AS curve upwards sloping?
The AS curve is upward sloping because at a higher price level, producers are
willing to supply more because they can earn more profits
What is AS?
The total output produced in an economy at a given price lvel over a given period of time
What are the two types of AS curve?
- LRAS
* SRAS
What curve does the SRAS have and why?
- SRAS slopes up from left to right.
* With an increase in price level there is an increase in the amount of output firms are willing to supply
What does inelastic SRAS mean?
SRAS curve slopes steeply upwards
What does it mean if SRAS is elastic?
Curve would be less teep
What is assumed in the long run?
• The economy will move towards an equilibrium where all resources are being used to full capacity, so the economy is running at full productive potential.
What does a vertical LRAS mean?
Any increase in the price level won’t cause an increase in output because the economy is running at full capacity, so it won’t create any more output.
What will cause a shift in SRAS?
SRAS will shift if there is a change in the costs of production
How does a fall in production costs affect SRAS?
At the same price level more output can be produced, so the SRAS shifts to the right.
What are some examples of things that cause shifts to the SRAS curve?
- Higher min wage
* Tax firms pay
What is LRAS determined by?
Factors of production, the LRAS will shift if there is a change in the factors of production which affect the capacity of an economy
