SRAS Flashcards
1
Q
Why does AS slope up
A
Higher price encourages firms to produce as more profit opportunities
2
Q
How does SRAS differ from LRAS
A
In SR, one FOP or more is fixed
3
Q
Law of diminishing marginal return
A
Employing additional labour reduces productivity, so cost per unit is more expensive, so prices must increase
4
Q
What factors shift SRAS
A
Change in COP
5
Q
What are the assumptions behind SRAS analysis
A
Fixed productivity, fixed input prices are constant, fixed tech
