2.3- Aggregate supply

factors affecting costs of production (SRAS curve)?

• wages

• raw materials

• oil prices

• business tax (VAT)

• import prices

• natural disasters

define YEE

the maximum level of output an economy can produce using all factors of production at sustainable levels

what causes LRAS curve to shift outwards (increase)

• quantity of capital / labour

• quality of factors of production increasing

• productive efficiency increases 

• increase in investment

• infrastructure (moving goods is quicker)

• competition = when higher, firms reduce costs as much as possible to beat rivalries

what causes LRAS to shift inwards (decrease)

• fall in labour supply

• mass capital depreciation

• pandemic- low productivity of labour

• hysteresis- caused by long term unemployment

• emigration- reduces size of labour force

Keynsian: difference between how a long run shift and a short run shift is shown on the LRAS curve

long run- curve moves left and right

short run- upward / downward shift