1. Warm-Up: What is the difference between demand-pull inflation and cost-push inflation?

2. Starting Point: PL1 O/E1 O/E A PL AS AD

3. Increase in AS: PL1 O/E1 O/E A PL B AS AS2 PL2 O/E2 PL: _______ O/E: _______

4. Decrease in AS: PL1 O/E1 O/E A PL B AS AS2 PL2 O/E2 PL: _______ O/E: _______

5. DETERMINANTS OF AGGREGATE SUPPLY 1.Resource Prices 2.Productivity 3.Production Technology 4.Government Taxes and Regulation

6. Determinants of AS Definition Increase in AS (MAKE MORE) Decrease in AS (MAKE LESS) 1. Resource Prices 2.Productivity 3. Production Technology 4. Gov’t taxes and regulations

7. Determinants of AS Definition Increase in AS (MAKE MORE) Decrease in AS (MAKE LESS) 1. Resource Prices The price it takes for business to make their goods and/or services 2.Productivity How efficient the labor force is 3. Production Technology The development of new and better technology 4. Gov’t taxes and regulations Laws and regulations that the gov’t passes for all businesses to adhere to

8. Determinants of AS Definition Increase in AS (MAKE MORE) Decrease in AS (MAKE LESS) 1. Resource Prices The price it takes for business to make their goods and/or services If resource prices goes down, AS shifts to the right. (make more) If resource prices goes up, AS shifts to the left. (make less) 2.Productivity How efficient the labor force is 3. Production Technology The development of new and better technology 4. Gov’t taxes and regulations Laws and regulations that the gov’t passes for all businesses to adhere to

9. Determinants of AS Definition Increase in AS (MAKE MORE) Decrease in AS (MAKE LESS) 1. Resource Prices The price it takes for business to make their goods and/or services 2.Productivity How efficient the labor force is If labor productivity increases, AS shifts to the right. If labor productivity decreases, AS shifts to the left. 3. Production Technology The development of new and better technology 4. Gov’t taxes and regulations Laws and regulations that the gov’t passes for all businesses to adhere to

10. Determinants of AS Definition Increase in AS (MAKE MORE) Decrease in AS (MAKE LESS) 1. Resource Prices The price it takes for business to make their goods and/or services 2.Productivity How efficient the labor force is 3. Production Technology The development of new and better technology If you have new or better technology, AS shifts to the right. If you develop no technology, AS shifts to the left. 4. Gov’t taxes and regulations Laws and regulations that the gov’t passes for all businesses to adhere to

11. Determinants of AS Definition Increase in AS (MAKE MORE) Decrease in AS (MAKE LESS) 1. Resource Prices The price it takes for business to make their goods and/or services 2.Productivity How efficient the labor force is 3. Production Technology The development of new and better technology 4. Gov’t taxes and regulations Laws and regulations that the gov’t passes for all businesses to adhere to If less laws and regulations are passed, AS shifts to the right. If more laws and regulations are passed, AS shifts to the left.

12. Determinants of AS Definition Increase in AS (MAKE MORE) Decrease in AS (MAKE LESS) 1. Resource Prices The price it takes for business to make their goods and/or services If resource prices goes down, AS shifts to the right. (make more) If resource prices goes up, AS shifts to the left. (make less) 2.Productivity How efficient the labor force is If labor productivity increases, AS shifts to the right. If labor productivity decreases, AS shifts to the left. 3. Production Technology The development of new and better technology If you have new or better technology, AS shifts to the right. If you develop no technology, AS shifts to the left. 4. Gov’t taxes and regulations Laws and regulations that the gov’t passes for all businesses to adhere to If less laws and regulations are passed, AS shifts to the right. If more laws and regulations are passed, AS shifts to the left.

13. Complete the following scenarios with your partner The auto industry is experiencing an increase in the price of steel. Using AD/AS analysis, show the effects of aggregate supply, prices and output/employment.

14. Shift the AS curve? Labor productivity in the U.S. is on the rise. Graph the situation and show how aggregate supply, prices and output/employment are affected.

15. Shift the AS curve? Improved technology has been developed in the U.S. computer industry. Graph the situation and show how aggregate supply, prices and output/employment are affected.

16. Shift the AS curve? New government regulations have been passed by Congress to improve the safety of SUVs. Graph the situation and show how aggregate supply, prices and output/employment are affected.

17. Shift the AS curve? Labor productivity in the computer industry has been rising at a faster rate than worker’s wages. Graph the situation and show how aggregate supply, prices and output/employment are affected.

18. Complete the Following Graphs for Aggregate Supply on your own paper (10 pts. Ea) 41) Labor productivity in the U.S. is on the rise. Graph the situation and show how aggregate supply, prices and output/employment are affected. 42) New government regulations have been passed by Congress to improve the safety of SUVs. Graph the situation and show how aggregate supply, prices and output/employment are affected.