The characteristics of Aggregate supply [2.3.1] Flashcards
What is the AS curve and what does it show?
AS is the volume of goods and services produced within an economy at given price level. Indicates ability of an economy to produce goods and services show relationship between real GDP and general price level. D
How can business increase their short run AS?
In short term if business want to increase production need to increase hours which employees work.
Firms may decide to take temporary workers or get present workers to do overtime or work harder entail offering an incentive like bonuses or higher rate of pay.
Average marginal cost of labour per good produced will rise business paying more in wages for every good produced. They will pass this onto consumers in form of higher price . Curve will be upward sloping firms supply more at a higher price. Short run AS is inelastic
What are movements and shifts along AS curve?
A change in the price level leads to a movement along the curve. A shift is caused by a range of factors if they affect short or long run AS.
