b) Short-run and long-run AS AS

S

• define short-run in terms of economics

• the time period where at least one factor of production is fixed

• state what influences short-run aggregate supply

• a change to the cost of production of goods and services

• state how a decrease of the cost of production of goods and services influences short-run aggregate supply

• state how an increase of the cost of production of goods and services influences short-run aggregate supply

• short-run aggregate supply increases → short-run aggregate supply curve shifts to the right

• short-run aggregate supply decreases → short-run aggregate supply curve shifts to the left

• define long-run in terms of economics

• the time period where all factors of production are variable

• state what influences long-term aggregate supply

• a change to the production capacity of the economy

• state what is meant by a change to the production capacity of an economy

• a change to the quantity or the quality of the factors of production

• state how a decrease of the production capacity of the economy influences long-run aggregate supply

• state how an increase of the production capacity of the economy influences long-run aggregate supply

• long-run aggregate supply decreases → long-run aggregate supply curve shifts to the left

• long-run aggregate supply increases → long-run aggregate supply curve shifts to the right

• state how a decrease to the production capacity of an economy influences a production possibility frontier

• state how an increase to the production capacity of an economy influences a production possibility frontier

• maximum productive potential of the economy decreases → production possibility frontier curve shifts inwards

• maximum productive potential of the economy increases → production possibility frontier curve shifts outwards