Shifts in the Aggregate Supply Curve

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    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

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