Shifts in the Aggregate Supply Curve
- A change in AS means that the total output that producers are willing to supply at any given price level alters
- An increase in AS means an increase in the productive capacity of the economy
- The main causes of this in the short run are changes in the costs of production
- If wages and costs of raw materials decreased, AS would increase
- In the long run, the two main causes of shifts in the AS cause are
- Changes in the quantity of resources.
- Changes in the quality of resources
- These causes can be further broken down by examining how the quantity and quality of particular resources can be affected
- Land
- Quantity – Discovering new oil fields or resource mines
- Quality – Cultivating farm land
- Labour
- Quantity – Increase population/immigration.
- Quality – Training, better education – increase in productivity
- Capital
- Quantity – Buying new capital goods, i.e. net investment
- Quality – Advances in technology
- Enterprise
- Quantity – Reduce regulation would allow more entrepreneurs to enter the market, e.g. privatisation
- Quality – Improving education
- Land