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Aggregate Supply (Aggregate supply curve (Short run AS ((These changes…

- - - - These changes mean that firms have a change in the cost of production but not the total amount they are willing or able to make
        
        i.e the productive capacity remains the same
    - - e.g if a new tariff was introduced then the cost of domestic firms tend to rise as they can't use cheap raw materials; AS decreases
    - - e.g cut in an indirect tax like the old GST means AS is expected to rise as people are more inclined to buy more so firms are more likely to increase supply
    - - e.g if the pound were to strengthen then imports become cheaper so AS would increase as the productive potential increases (AS shifts right)
    - - For example; if the cost of oil rises then costs of production of almost everything will rise which means AS will decrease (shift left/up)
  - - - Direct impact on supply, skills and costs of labour which therefore impacts AS. In SR migration may increase AS as it is an influx of willing and skilful labourers. In the LR if migrants stay, have children and become dependant elders the impact on AS may stagnate
      - An aging population like Japan will have a falling productive capacity as less people are able to work, meaning a decrease in AS
    - - If firms are forced to be competitive instead of acting as monopolies then they have to cut prices and increase their quality which will increase AS
    - - A cut on corporate taxes may increase AS as firms are able to spend more money on production
      - A cut in benefits like the jobseekers allowance may mean that people become more reliant on jobs so they try harder to keep them by doing more work thus productivity increases (AS also increases) however this may mean that people become less healthy/more tired so over time productivity decreases
    - - e.g advancements in combine harvesters means that the firm can reduce costs and broaden ranges as technology is more efficient, cheaper and easier to 'exploit' than human labour; increases AS as the productive capacity rises
    - - e.g if there is an increase in school funding than AS is expected to rise as more people well educated/skilful/trained means a more productive and efficient workforce
- - - - And if the cost of production rises then AS is likely to fall
- - - - i.e AS is vertical in the long run