Economics A Level Aggregate Supply

What is AS?

the total output in an economy at a given price level over a given period of time

What does SRAS show?

when there is an increase in the price level, there is an increase in the amount of output firms are willing to supply

Is the SRAS curve steep or gradual when price inelastic?

steep

Is the SRAS curve steep or gradual when price elastic?

gradual

What is assumed in the long run?

that an economy will move towards an equilibrium where all resources are being used to full capacity

What does the LRAS curve show?

an increase in price level won't cause an increase in output because an economy is running at full capacity so can't create any more output

What causes the SRAS to shift?

changes in cost of production (a reduction in the costs of production means that at the same price level, more output can be produced, so the SRAS will shift to the right)

What are some examples of costs of production changing?

wage rates/taxes firms pay/efficiency levels

What causes the LRAS to shift?

changes in the factors of production which affect the capacity of the economy