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MACROECONOMICS - Coggle Diagram
MACROECONOMICS
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AGGREGATE SUPLLY
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AGGREGATE SUPLLY CURVE SHOWS THE OUTPUT QUANTITY THAT FIRNMS ARE WILLING TO PROVIDE AT A PRTICULAR PRICE LEVEL.
HORIZONTOL SECTION (KEYNESIAN)- IT SHOWS THE ECONOMY IS SUFFERING FROM A RECESSION. FACED WITH FALLLINGECONOMIC ACTIVITY, RESOURCE EMPLOYMENT AND REAL PRODUCTION TEND TO FALL. WHEN THERE IS INCREASE IN PRODUCTION, THERE IS NO INCREASE IN PRICE. BECAUSE UNUSED RESOURECES ( LABOUR & RAW MATERIAL) WILL BE USED TO INCREASE PRODUCTION. SO THE OVERALL AVERAGE COST IS CONSTANT.
UPWARD SLOPING SECTION- AT THIS LEVEL, THE PRODUCTION INCREASES FROM Y0 TO Y1 AND THE PRODUCTION FACTOR RELATIVELY DECREASES. FIRMS WILL COMPETE AGAINST EACH OTHER FOR RESOURCES THAT ARE SCARCE. THIS CAUSES THE INPUT PRICE TO RISE, MEANING THE COST OF PRODUCTION WILL INCREASE.
VERTICAL SECTION- THE ECONOMY HAS ACHIEVED FULL EMPLOYMENT. HERE, IT IS DIFFICULT TO INCREASE PRODUCTION UNLESS THERE IS A PRICE INCREASE. THEREFORE, THE AS CURVE IS VERTICAL.
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