2.3.2 Short-run AS

• SRAS curve shifts


  1. Changes in the conditions of supply

  2. Costs to businesses
• Costs that can shift SRAS curve

  • Cost of employment (wages, taxes, labour productivity)
  • Cost of other inputs (raw materials, commodity prices, exchange rate)
  • Government regulation or intervention (environmental laws, green taxes, business regulation)
  • Net outward migration of workers
  • Fall in business capital spending
• Costs increase


  Supply shifts inwards from SRAS1 to SRAS3
• Stronger currency


  Reduces price of imports, shifts AS curve outwards from SRAS1 to SRAS2
• Business regulation is sometimes called 'red tape'
• Net outward migration of workers

  Causes 'brain drain' on the domestic economy
• Fall in business capital spending

  Supply will fall