1. Introduction to Aggregate Supply Module 18

2. Key skills and content Define AS (aggregate supply) Explain why the AS curve is upward sloping Identify the determinants of AS Explain why the AS curve shifts Draw a correctly labeled AS curve when given a hypothetical scenario

3. BASICS DEFINITION- total supply of all goods and services in the economy LABELS- AS is a macroeconomic model so use macro labels NOT micro labels – YES: AS (or SRAS), AD, price level, real GDP) – NO: P, Q, D, S Positive slope? – Firms produce more as prices rise – Profit per unit increases – Assumes that most production costs are fixed

4. Short-run? Defined: productions costs are fixed (do not change) Wages (cost of labor) are one of the largest production costs Sticky wages

5. Draw a correctly labeled graph of AS

6. An alternative way to draw the SRAS

8. Either is acceptable to A.P.

10. Decrease in resource prices would cause shift to SRAS 1

11. Decrease in wages would cause shift to SRAS 1

12. Increase in productivity would cause shift to SRAS 1