Macroeconomics - L3 Aggregate Supply Flashcards
What does Aggregate Supply represent?
The total volume of goods and services that all suppliers have produced and supplied over a period of time.
What is Aggregate Supply influence by?
The ability and willingness of producers to produce.
What is production?
The process of converting resources and inputs into goods and services or the total volume (or value) of goods and services produced over a given time period.
What is productivity?
The rate at which a company, country, or person does useful work. Productivity is measured by output per unit of input.
What is productive capacity?
The point at which production (or GDP) is occurring at the maximum level possible in an economy.
List the 5 factors that affect Aggregate Supply.
- The quantity of factors of production
- The quality of factors of production
- Costs of production
- Technological change
- Productivity growth
What are factors of production?
Resources.
Land/natural resources
Labour/human resources
Capital/equipment resources
An increase in the quantity of workers available to producers will lead to an increase or decrease in the ability and willingness of producers to produce? Why?
Increase
Because having more workers available means more output can be produced. Producers are both willing and able to produce more.
A decrease in the quality of equipment available to producers will lead to a decrease in the ability and willingness of producers to produce because…
Producers will be less able to produce as much output as other producers with better quality equipment, even if they are willing.
A government imposed increase to the minimum wage will increase the cost of production for producers, making them less willing and able / more willing and able to produce because…
Less willing and able.
Because as their costs have gone up they can now only produce less output for the same level of inputs.
The introduction of Artificial Intelligence being used by businesses is a factor that affects Aggregate Supply. Which factor?
Technological change
Producers implementing AI into their businesses will increase or decrease Aggregate Supply? Why?
Increase.
Because producers are both more willing and able to produce as a result of the benefits and efficiencies that Artificial Intelligence offers.
Producers are experiencing a decline in productivity since the Covid 19 pandemic. Which factor affecting AS does this relate to?
Will AS increase or decrease?
Productivity Growth.
Decrease.
Due to a mild winter, construction companies have experienced minimal delays constructing homes and as a result AS has increased. Which factor affecting AS does this relate to?
Climatic conditions.
