Causes Of A Shift In The As Curve In The Short Run (Sras) And In The Long Run (Lras)
Economics notes
Causes Of A Shift In The As Curve In The Short Run (Sras) And In The Long Run (Lras)
➡️ In the short run, the SRAS curve is upward sloping, which means that an increase in aggregate demand (AD) will lead to an increase in output and prices. This is because firms can increase output by increasing their labor and capital inputs, but the prices of these inputs are fixed in the short run.
➡️ In the long run, the SRAS curve is a sweeping curve, which means that an increase in AD will lead to an increase in output but a decrease in prices. This is because firms can increase output by increasing their labor and capital inputs, but the prices of these inputs are flexible in the long run and can adjust to the increase in demand.
➡️ In both the short and long run, the SRAS curve is affected by changes in aggregate supply (AS), which is determined by the availability of resources, technology, and other factors. An increase in AS will lead to an increase in output and a decrease in prices, while a decrease in AS will lead to a decrease in output and an increase in prices.
What are the causes of a shift in the SRAS curve?
The SRAS curve can be shifted by changes in the cost of production, such as changes in the price of labor, capital, or other inputs. Changes in taxes, subsidies, and government spending can also cause a shift in the SRAS curve.
What are the causes of a shift in the LRAS curve?
The LRAS curve can be shifted by changes in the level of technology, the size of the labor force, or the availability of capital. Changes in the population size or the level of education can also cause a shift in the LRAS curve.
How do the causes of a shift in the SRAS curve differ from the causes of a shift in the LRAS curve?
The causes of a shift in the SRAS curve are primarily related to changes in the cost of production, such as changes in the price of labor, capital, or other inputs. The causes of a shift in the LRAS curve are primarily related to changes in the level of technology, the size of the labor force, or the availability of capital.