Short Run AS

Level: AS Levels, A Level, GCSE – Exam Boards: Edexcel, AQA, OCR, WJEC, IB, Eduqas – Economics Revision Notes 

Short-Run Aggregate Supply

[diagram]

• Upward Sloping AS Curve – the Aggregate Supply curve is upward sloping in the Short Run, suggesting a positive relationship between price level and the quantity of goods / services.
• Capital is fixed – in the short term, the amount of capital remains the same
• SRAS is Elastic – firms are able to increase their output (or decrease if need be) by altering the hours and amount of work that employees do

Factors causing a shift in the SRAS

• Prices and costs of raw materials / commodities – the cheaper it costs to secure raw materials, the more that firms will be able to supply within their given budgets
• Levels of taxes or subsidies available to firms – if the amount of tax a firm has to pay rises, the amount of goods / services they are able to provide may decrease. On the other hand, if a firm has access to a subsidy, they may be able to use the extra funding to increase their supply
• Cost of labour (wages) – if the the wages paid to employees increase, firms will incur greater costs
• Change in Exchange Rates

Quick Fire Questions – Knowledge Check

1. Using a diagram, explain the characteristics of Aggregate Supply in the short-run (6 marks)

2. Identify and explain four factors causing a shift in the SRAS curve (8 marks)

Next Revision Topics

• Aggregate Supply
• Long Run AS
• Supply
• Supply Side Policies

A Level Economics Past Papers

• AQA
• Edexcel
• OCR
• WJEC