Short run aggregate supply
A movement along the SRAS curve
A change in the price level brought about by a shift in AD results in what ?
the level of real national output that producers are prepared to supply at different average price levels
Define aggregate supply
Expansion along the curve
If AD rises, what happens to SRAS ?
- all firms aim to maximize profits - in the short run, cost of producing extra units of output increases as firms produce more output
The upward-slope of the SRAS curve is explained by what two microeconomic assumptions about the nature of firms ?
- costs of production - taxes firms have to pay - technology - productivity - attitudes - enterprise - factor mobility - economic incentives facing workers and firms - institutional structure of the economy
What are the main determinants of the SRAS curve ? (9)
if one of the factors of SRAS change
When does the AS curve shift ?
labour
give an example of a variable factor of production
variable factors of production
in the short run, firms cannot change some of the fixed capital they use, so it follows that firms can only increase output in the short run if they add what to their fixed capital assets ?
price level must rise
what must happen to persuade firms it is in their interest to produce a larger output ? (movement along curve)
higher prices are needed to create higher sales revenues needed to offset the higher production costs that firms incur as they increase output so profits do not fall
why must the price level rise for firms to produce more output ?