Th2.3: Factors Influencing Long Run AS

Question 1

What are the six factors of influencing long run aggregate supply?

Answer 1

technological advances
changes in relative productivity
changes in education and skills
changes in government regulations
demographic changes and migration
competition policy

Question 2

Technological advances

Answer 2

increased investment in technology will increase the LRAS as it means that more goods can be produced because there are more machines

Question 3

Changes in relative productivity

Answer 3

if the UK is more productive than other countries it will encourage production of that good in the UK, so investment will be increased, and this will increase LRAS

Question 4

Changes in education and skills

Answer 4

a more skilled workforce will be more employable and work quicker and more efficiently within their jobs, so the output per worker will increase, shifting LRAS to the right - same with educatioon

Question 5

Demographic changes and migration

Answer 5

if immigration is higher than emigration, the population will grow and so therefore there will be more workers which will increase the LRAS - more who are of working age, higher LRAS

Question 6

Competition policy

Answer 6

government can promote competition between businesses/markets, forcing them to improve quality of goods or lower prices. to do this, they have to increase efficiency, producing more goods and services and therefore LRAS will increase