2.3.2 Short run AS

• Why does the SRAS slope upwards

  It is because if real output increases in the short run, firms will have to pay overtime or more money for quick delivery of raw materials etc.
• What happens if real output increases in the short run

  Cost per unit to forms and industries are likely to increase. These increased costs will tend to be passed on to the consumer through higher prices, so the increase in real output has resulted in a rise in the average price level
• What causes a movement in the SRAS curve

  A change in price level
• A rise in the price level due to an outward shift in aggregate demand will lead to an expansion in SRAS
• What causes a shift in SRAS

  It is caused by a change in a firms cost of production
• For example a decrease in a firms cost will cause and increase in SRAS and an outward shift
• A firms costs of production are very significant in the short run as they change very rapidly. Whereas longer term changes like tech improvements impact on LRAS
• What does a rise in a firms costs of production mean for them

  This will reduce the incentive to produce and therefore decrease SRAS
• What may cause an inward shift in SRAS

  Commodity prices

  Energy costs

  Wage costs

  Indirect taxes

  Government regulation

  Imported raw materials (due to a strong exchange rate)
• What are some examples of commodities

  Oil

  copper

  gold