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Aggregate Supply - Coggle Diagram
Aggregate Supply
Short Run (SRAS)
Profit Effect
Increased profit margin as price increase and cost stay the same, motivating firms to produce more
Cost Effect
Average costs may increase short term, hence producers increase production cover these costs
Misinterpretation Effect
Producers might think they are getting paid more for their products because it’s becoming more popular and as a result want to produce more
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The total output of an economy that will be supplied when there has not been enough time for the prices of factors of production to change
Long Run (LRAS)
The total output of a country supplied in the period when prices of factors of production have fully adjusted
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Shape of LRAS Curve
Keynesians
Perfectly elastic at low rates of output, then upward sloping over a range of output, then perfectly inelastic
New classical economists
Vertical line, because economy will operate at full capacity in the future
The total that producers in an economy are willing and able to supply at a given price level in a given time period