{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

micro vs macro S

micro vs macro S - supply would be more elastic in long run...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Microeconomics versus Macroeconomics supply curve: In microeconomics, we learnt that in the long run, supply curve is more elastic compared than the short run supply curve. In macroeconomics, the long run supply curve is a vertical line perfectly inelastic …..WHY?? The difference is that in microeconomics, the market we are talking about is about 1 single good!!! E.g. the market for apple OR the market for orange OR the market for computer….etc. But in macroeconomics, we are talking about the real GDP, that is the aggregate output in the whole country……E.g. apples & oranges & computer & clothing & shoes & ice cream etc…… we add up all output in a country. In microeconomics, when we talk about the market for 1 single good, say apple, then
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: supply would be more elastic in long run. In short run, only the apple farmers know how to grow apples, then we can’t easily increase the supply of apples… but in the long run, we can train more people to become apple farmers e.g. we can train the orange farmers to become apple farmers…. so we can more easily to increase the supply of apple, so supply of apple is more elastic in the long run. In macroeconomics, in long run, we assume FULL EMPLOYMENT LEVEL, given full employment level, the aggregate output (real GDP) is constant given all price level, so the long run aggregate supply curve is a vertical line....
View Full Document

{[ snackBarMessage ]}

Ask a homework question - tutors are online