ECONOMICS
AGGREGATE SUPPLY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Yes, I understand this from the notes
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No, I don’t understand this from the notes
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No, I don’t understand this, as I have not read the notes
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None of the above
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Detailed explanation-1: -The reason why the supply curve is more inelastic (steeper) in the long run is because firms will be able to adapt to changes in price levels better. For instance, suppose that a firm can only increase production by 5% by changing short-run production factors and that the price level increases by 15%.
Detailed explanation-2: -The Short-Run Aggregate Supply Curve (SRAS) The SRAS curve shows that as the price level increases and you move along the SRAS, the amount of real GDP that will be produced in an economy increases. An increase in the SRAS is shown as a shift to the right.
Detailed explanation-3: -The SRAS is viewed as elastic, because in the short-run firms can increase output by getting workers to do overtime.
Detailed explanation-4: -The price elasticity of demand is calculated by dividing the percentage change in quantity demanded by the percentage change in price. If the quotient is greater than or equal to one, the demand is considered to be elastic. If the value is less than one, demand is considered inelastic.