2.3.1 Characteristics of AS

• What does the AS curve represent?

  Volume of goods produced at a price level
• How does the AS curve relate to real GDP?

  It shows the relationship with average price levels

  
• What must a business do to increase production in the short run?

  Increase employee work hours
• Why might firms avoid hiring full-time staff in the short run?

  To avoid commitment and potential layoffs
• What alternatives might firms consider instead of hiring full-time staff?

  Hiring temporary workers or overtime
• What incentives might firms offer to encourage overtime work?

  Bonuses or higher pay rates for overtime
• What happens to the average and marginal cost of labor when production increases?

  They rise as wages increase per good produced
• How do increased wages affect consumer prices?

  They lead to increased prices for consumers
• Why is the AS curve upward sloping?

  Firms supply more only at higher prices
• What does it mean for short-run AS to be elastic?

  Output changes more than price changes
• What happens to prices when demand falls in the short run?

  Firms cut prices to stimulate sales
• What causes a movement along the AS curve?

  A change in the price level