Characteristics of aggregate supply

• What is aggregate supply?

  The total amount of goods and services that all firms in the economy are willing to supply at a given price level in an economy in a year
• What does does the short-run aggregate supply curve show?

  The costs of production, and it indicates that when the price level increases, firms in the economy as a whole are willing to supply more
• Why can't firms continue to supply more as the price level rises up to a certain point?

  Because firms reach maximum capacity - the ful employment level of real output where the AS curve becomes vertical
• When does movement along the AS curve occur?

  When there is a change in the price level caused by factors that are not related to aggregate supply, for example changes in aggregate demand
• When does a shift in the AS curve occur?

  When there is a change in the costs of production
• What does the SRAS curve assume aboout resources?

  That they are fixed, though they can be used more efficiently
• What does the LRAS assume about resources?

  That they are variable