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According to an academic understanding, term aggregate is recognised on the basis of demand and supply which include Aggregate Demand (AD) and Aggregate Supply (AS) (Gwartney & et. al., 2012). In this essay, the discussion highly focuses on the concept of Aggregate Supply (AS). The discussion also incorporates an analysis of three key factors that might cause the AS curve to shift using appropriate graphical illustrations. Additionally, the discussion includes the example of the UK in terms of analysing the major influencing factors on the country’s aggregate supply portfolios.
The concept of Aggregate Supply (AS) in economics principally represents the existing relationship among the price and the quantity level with the total amount of goods or services supplied. In general, the concept of AS refers to the overall supply of commodities and services produced within a particular nation (Mankiw, 2014).
The changes in the AS curve are generally influenced by a number of factors of a particular nation. However, the change in the AS curve shift is primarily influenced by three key factors that include economic growth, change in input price and substitution effect of goods/services of that particular country.
The positive growth rate in an economy is resulted by the increase in productive resources including labour and capital of a country. The availability of abundant labour and/or capital resources helps to produce extensive numbers of final goods and/or services as well as provide support to increase the annual GDP growth rates. In this regard, a positive growth rate of economy of a country is represented by a shift towards the right of the AS curve. On the other hand, the lower growth rate of economy represents shift towards the left side of the AS curve (Mankiw, 2014).
In relation to the current economic performance of the UK, the country has been witnessing unabated fluctuation
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For instance, Adam Smith’s theory of the invisible hand argues that when people engage in business and selling they are governed by the invisible hand of the market that helps regulate prices and ensures that businesses and people act in certain ways. Indeed, the nature of economics is like psychology in that it presents theories of human behavior.
As such, economic analysis relates to the study of economic systems in an industry to ascertain the effectiveness of the operations of a given industry with reference to its profitability1. With this, we are able to establish the optimum use of the limited resources to achieve a given economic objective.
Thus, short-run is the time period that quantity of an input or at least one of the many inputs is fixed while other inputs’ quantities can vary. Long-run on the other hand is that time period where inputs in entirety can be varied. Therefore, there is no specific time that can be taken as fixed or even marked on the dates of the calendar to distinguish short-run from the long-run.
If the quantity demanded of a certain product changes minimally or does not change at all, then that product is said to be a Price Inelastic Good. Consequently, if a product whose price increased and such a change brought forth an abrupt drop in quantity demanded of the same product, the good is said to be Price Elastic.
e that the people of a country would receive the best of every thing that could be education, housing, health services or the other various basic necessities.
Economics has been called and is known as a Social Science one that actually focuses on the subject matter that is
sought to apply a broader theoretical and conceptual tradition of economic thought by placing emphasis on neo-classical synthesis – a combination of neo-classical economics and Keynesian economics.
Conservative economics is based on Milton Friedman’s teachings and
s the above figure illustrates, if there is a supply shock in an economy (such as increase in the price of oil, labor or other costs that increase the cost of doing business), the short run AS curve shifts to the left. The real GDP decreases from Q to Q’ and the price level
These tools enable professional mainstream economists to address various economic issues facing the world. Mainstream economics is about modeling in a way that traditional or heterodox economics is not. It originated from the neoclassical synthesis of the neoclassical
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